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From the NYT:
Why I Support a Border-Adjustment Tax
By WILLIAM J. JONES MARCH 30, 2017
Most of the R&D work that makes Apple and Microsoft products wildly profitable around the world is done in the U.S.. But the IRS seldom manages to collect its 35% tax on corporate profits from sales abroad due to blatant tax evasion tactics.
As I wrote in 2011:
Yesterday, Microsoft announced it had made net income of $5.87 billion in the latest quarter, but had reduced its tax rate from 25% a year ago to 7%. Annualized, that would be about $4 billion incremental in tax avoidance just over the last year. You’re probably saying to yourself, “Hey, I’d like to reduce my tax rate by 72% from 2010 to 2011, too! What are some tips from Microsoft on how I could do this?” …
You see, Microsoft has over 40,000 employees in the state of Washington in the United States. But they don’t actually physically burn on to disks the software they develop. Instead, Microsoft, has a manufacturing plant in Puerto Rico employing 185 people that gets credited in Microsoft’s books with a lion’s share of Microsoft’s Western hemisphere revenue and profits. It’s making disks that’s the really important thing that Microsoft does.
Despite all you’ve heard about Microsoft being a software company, they are actually a manufacturing company, at least for tax accounting purposes. To the IRS, Microsoft is basically a Puerto Rican, Irish and Singaporean industrial goliath with a money-losing R&D outpost in Redmond, WA.
The Border-Adjustment Tax is something the Trump Administration has been considering. Cut the corporate income tax from 35% to 20%, but then impose a smart BAT to actually collect the 20%.
That sounds like a good idea but I have to confess that the three words “Border-Adjustment Tax” make my eyes glaze over. “Adjustment” is one of the most boring words in the English language, wholly lacking in moral urgency.
What would be a better term? Border-Equalization Tax?