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Trump Revives Talk of ‘Reciprocal Tax’

Posted on July 17, 2017 by Jonathan Curry

Talk of a reciprocal tax, an ill-defined proposal that confounded experts and for months sparked speculation about President Trump’s stance on the controversial border-adjustable tax, is back following a recent interview with Trump.

Speaking with reporters July 13 while on a trip to France, Trump addressed the trade relationship between the United States and the European Union. “They’re very protectionist. And we’re not. And you have to be reciprocal,” the president said, according to excerpts of the interview released July 14 by The New York Times.

Trump then explained his vision for a reciprocal tax: “To me, the word reciprocal is a beautiful word. Because people can say, we don’t like a border tax or we don’t like this or we don’t like that. But what they can’t say is that, if you’re selling a motorcycle and they’re coming into your country and not paying tax, and they’re going into another country and paying 100 percent tax, people understand that’s not fair. So we say we make it reciprocal.”

Trump has long advocated a proposal he has labeled variously as a border tax, a reciprocal tax, a mirror tax, and other terms. Despite the similar nomenclature, the relationship between what Trump is calling for and House Republicans’ border-adjustable tax has always been tenuous. Trump himself said in a May 4 interview with The Economist that the border-adjustable tax is “not really what I’m considering.”

The key distinction between what Trump has proposed and the border-adjustable tax proposal is that Trump appears to be proposing a tax on imports designed to influence trade imbalances — in effect, a tariff. But as Rohit Kumar of EY explained to Tax Analysts, it lacks the border-adjustable tax’s “corresponding relief for exports.”

A White House aide told Tax Analysts May 15 that while it was still undecided whether plans for a reciprocal tax would be implemented through the tax code or as a tariff, the administration had no intention of including it in a tax reform package. “The president generally references the reciprocal tax in the context of trade, not of tax reform,” the aide said.

The White House did not respond to Tax Analysts’ request for comment by press time.

Follow Jonathan Curry on Twitter (jtcurry005) for real-time updates.