Michael Graetz on the “Known Unknowns” of House Republicans’ Proposed Business Tax Reforms

Columbia Law School Professor Michael J. Graetz has published online a set of slides that examines the potential effects of a border-adjusted destination-based cash flow tax (DBCFT) as proposed in the 2016 House Blueprint “A Better Way.”

While the Republicans' proposal appears to be a reform of the corporate income tax, in reality it would repeal the corporate income tax and substitute a tax similar to a value-added tax, according to Graetz. On February 10, 2017, The New York Times' Upshot columnist Neil Irwin cited Graetz's research to argue that the proposed tax code change would have a negative cascade effect. 

One of the world’s foremost scholars of national and international tax law and policy, Graetz outlined in his research the steps needed to transform the corporate income tax into a DBCFT, and examines its potential benefits related to international corporate tax problems.

The presentation also addressed a range of issues raised by this unique tax, including:

  • international obligations and arrangements;
  • effects on prices of goods and services, as well as exchange rates and wages;
  • impact on trade agreements and bilateral income tax treaties;
  • how state and local governments would react;
  • accounting treatment and effect on revenue and losses;
  • burdens of the tax – winners and losers under the proposal;
  • enforcement and exemptions; and
  • financial transactions and taxation of financial institutions.

Finally, Graetz offered several alternatives to the DBCFT. The ideas presented in this work will form the basis for an article forthcoming in the Columbia Tax Journal.

Graetz is perhaps best known for his “Competitive Tax Plan," which he devised more than a decade ago, and updated in 2015. Detailed in his critically acclaimed book "100 Million Unnecessary Returns," Graetz proposes a fundamental tax reform that would replace income taxes on low- and middle-income households with a value-added tax on goods and services.

Before entering academia Graetz held several positions in the federal government. In the 1990s, he served in the Department of Treasury as deputy assistant secretary for tax policy, and then as assistant to the secretary and special counsel. 

Related:

New York Times oped, "Trump Probably Avoided His Medicare Taxes, Too"

Graetz' book “Follow the Money: Essays On International Taxation," a collection of essays written over the past two decades that examines issues surrounding international income taxation.

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Posted February 4, 2017, Updated February 11, 2017

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