A new congressional brief argues that shifting America's business tax from where goods are made to where they are sold would level the playing field for US producers, curtail offshore profit shifting — which already costs the federal government 16% of corporate income tax revenues — and require no new taxes or rate increases to achieve.
The US Joint Economic Committee (JEC) released a brief entitled ‘Border Tax Adjustment Would Curtail Profit Shifting and Provide Other Benefits, With Limited Transition Effects’ on 11 March 2026, which outlines the economic case for moving from a production-based tax to consumption based, while not adding new taxes.
Currently, there is largely a “Made in America” business tax. That means if a business builds it here, hires here, and invests here, it faces a US tax burden. Meanwhile, many other countries tax based on where things are sold. This mismatch disadvantages American producers. By adopting border adjustment reforms, the tax burden flips the focus to taxing products where they are used, not where they are made. This adjustment allows for businesses to pay tax on what they earn minus what they are spending, including full, immediate write-offs for investment. This reform is consistent with free market principles by removing tax distortions that favour foreign production. It removes unfair tax advantages and treats goods the same based on where they are sold. This makes it easier to build factories in the US, buy equipment and create jobs.
This brief highlights how adopting border adjustment reforms puts American producers first and levels the playing field for consumers and American businesses. Major points of the brief include:
- America’s current business tax is a “Made in America” tax, while many other countries tax consumption. This disadvantages American producers and creates opportunities for multinationals to shift profits offshore, costing the US government 16% of corporate income tax revenues as of 2019.
- Border adjustment changes the US business tax base from production to consumption. It does so by denying tax deductions for import costs and excluding export revenue from taxable income. This reform does not raise tax rates or add a new tax.
- Border adjustment is an efficient way to raise tax revenue and curtail profit shifting. It is economically equivalent to a tariff on all imports, including services, plus a same-percentage subsidy for all exports. The export subsidy neutralises the trade distortions that tariffs create in isolation.
- Transition effects, including currency price changes or short-term effects on importer costs, are real but surmountable. The US dollar has appreciated 27% over short periods without crisis, and tariff rates have reached 28% in the past year. A full border adjustment would entail approximately 27% US dollar appreciation, or temporary effective tariff rates much lower than 28%.
- The TCJA and the Working Families Tax Cuts Act (WFTCA) both moved in the direction of border adjustment, but they did not finish the job. FDDEI partially shields export income from taxation. Legislation can complete the border adjustment by enacting matching tariffs and expanding FDDEI.
