Trump’s much-vaunted tax overhaul might not be as good as he claims. In fact, according to Harvard tax expert, Stephen Shay it is: “clearly the result of rushed legislation”.
Shay has discovered a loophole in the new tax code which enables companies with overseas earnings and ‘illiquid’ assets (e.g. property) to choose between a higher and lower tax bracket.
The Republican overhaul of the US tax code passed at the end of this year offers companies with more than $2.6t.in overseas profits the options of a 15.5% or 8% tax rate.
By funnelling assets into offshore illiquid assets, companies can expect to pay a much lower rate of tax when earnings are repatriated.
The results could be significant for companies with turnovers into the trillions who could hope to save billions.
According to Shay, Apple can expect to make savings of $4bn. using this lucrative loophole.
Why This Matters.
If this loophole is verified it fundamentally undermines the keystone of Trump’s electoral appeal: his ability in economic affairs.
What has made many elites stomach the incumbent, despite his flagrant insensitivities, is he claimed to be able to turn America’s economy around with a smart, business-friendly reform of the tax code. While many boardroom execs will surely be popping the champagne, such obvious mistakes, indicative of a rushed job, suggests the Trump administration is out of its depth.
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