The Republican government’s Border Adjustment Tax has garnered support from the aerospace industry as key players from this sector have thrown their weight behind the government on this issue. The group of defense and aerospace companies has Boeing leading from the front and it has made a call for a massive revamp of the existing tax system. They are also pushing to bring in changes to import tax deductions that will have some dramatic consequences for all the players in this niche. A letter has been sent to Congress by Dennis Muilenburg, who is the Boeing CEO and also the chairman of the Aerospace Industries Association, outlining the views of the industry and urging them to push through the tax reforms.
The implications of the proposed policy
The supporters of the policy have good reasons for their vote, especially those who are part of the aerospace industry where costs tend to be uncontrollable. In particular, the fact that the proposal aims to prohibit the deduction of import costs by businesses seems to be one factor that is prompting Boeing to support the move. As pointed by a media house, the Boeing will benefit despite this clause because most of its products are exports. Since exports can continue to be posted as deductions, capital investments will be allowed as deductions immediately, the proposals will come as a good move for the company, if the changes come into force.
Two sides of the coin
The aerospace group supporters of the tax proposal also mention that the changes will come as welcome relief for everybody because they will fix the flaws with the current policy and also give an impetus to domestic manufacturing activity. However, critics have been pointing out that it will cause major disruption in business models and also result in goods becoming significantly more expensive.
The proposal, broadly, aims to bring down the corporate tax rate and simultaneously introduce taxes on imports. President Trump has been advocating the idea of low corporate taxes since his campaigning days and this proposal only puts down in writing what he has been promising. While everyone is in agreement that the tax code does need some major reforms, the nature of those reforms has not been agreed upon yet. Strongly opposing the Republican proposal are Target and Wal-Mart, both of which believe that the resulting price increases will make the policy unviable for consumers.