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Tax Trump additionally proposed capping itemized deductions at $100,000 for single filers and $200,000 for married filers and highlighted the benefits of his proposals for working Americans and the middle class. “By lowering rates, streamlining deductions, and simplifying the process, we will add millions and millions of new jobs. In addition, because we have strongly capped deductions for the wealthy, and closed special interest loopholes, the tax relief will be concentrated on the working and middle class taxpayer..,” he said. “This is a working and middle- class tax relief proposal.” A campaign fact sheet proclaimsthat Trump’s economic proposals would add 25 million jobs over a decade, which equates to 200,000 new jobs per month. The motivating factors for tax reform will remainthe same as they were in the current Congress, but unified government should make enacting tax reform much easier. The statutory corporate incometax rate is seen as too high and the international tax system compels profit shifting to low-tax jurisdictions and erodes the US tax base. That phenomenon escalated this year with the European Commission’s latest state aid decision, which was seen as demonstrating a tension between the US and Europe over who should tax the foreign income of US multinationals. The passage of the EU’s harmful tax competition directive willlead to enactment in all EU countriesof a variety of measures that could increase taxes on US companies operating in Europe, while implementation of innovation box regimes in many countries, following the OECD BEPS project outline, will make it more attractivefor US companies to move intellectual property and exploit that IP into those jurisdictions. The Administration took significant steps this year to try to prevent further erosion of the US tax base through regulatory action to deter inversions and earnings stripping, but all involved said these were Band-Aid approaches that were no substitute for US tax reform. Design issues —international tax reform. As has been the case for the last few years, there is broad agreement on the design elements of businesstax reform, and more specifically, international tax reform, but the devil is in the details. For example, the House Republican Blueprint on tax reform calls for a 8.75%tax rate on previously untaxed accumulated foreign earnings held in cash or cash equivalents, and a 3.5 %tax rate on all other accumulated earnings, with tax liability payable over an eight-year period. This is the same tax treatment of accumulated foreign earnings called for under former Ways and Means Committee Chairman Dave Camp’s (R-Ml) Tax Reform Act of 2014. But in a departure from the Camp bill, the Blueprint also callsfor a move to a destination-basis tax system, under which border adjustments exempt exports from tax while taxing imports, making the tax jurisdiction the location of consumption rather than production. Exempting exports from US tax and taxing imports regardless of where they are produced will eliminate incentives for US businesses to move or locate operations outside of the United States under a territorial tax system, according to the Blueprint. By relieving exports from US tax while imposing US tax on imports, the Blueprint would eliminate the need for any new exemption or territorialtax system to be accompanied by a minimum tax or any other more conventional anti-base erosion measure, thereby sidestepping one of the more intractable and divisive debates among the business community over the past several years of tax reform discussions. Developing a workable border adjustability mechanism that is not actually a component of a value-added tax presents some significant policy and technical hurdles. US companiesthat are net exporters could end up ina perpetual tax loss position, and handing out refunds to some of the largest US companies may not work froma political standpoint, particularly as the domestic income of US companies (including the suppliers for exporting companies) is subject to tax. How to apply the border adjustability concept to cross-border flows of capital, or whether to exempt financial transactions must also be considered. While moving to a form of exemption system has some level of bipartisan support, more liberal Democrats will insist on a more pure worldwide system that includes repeal of deferral. Senate Finance Committee Ranking Member Wyden (intermittently) and Senator Warren (consistently) have both backed the latter approach, and Speaker Ryan noted the differing viewpoints in September given that Democrats increasingly call for a worldwide system and repeal of deferral. EY 14 | Election 2016 HOUSE_OVERSIGHT_022386