The Supreme Court will hear arguments next month about the legality of President Trump’s use of the International Emergency Economic Powers Act to impose tariffs on nearly all imports to the U.S. If the court finds the White House has exceeded its authority, the Trump administration may seek other ways to tax imports.
Rather than pursuing new tariffs, Mr. Trump should work with Congress to adopt a destination-based cash flow tax, or DBCFT. This business-tax reform would address many of the president’s concerns over trade, expand the American economy, and offset the lost tariff revenue.
The DBCFT has three important features. First, all investment costs can be immediately deducted rather than depreciated over years or decades. Second, there is no deduction for borrowing costs. Third, a “border adjustment” would subject all imports to a single rate tax while providing all exports with a subsidy at the same rate.
