House Speaker Paul Ryan's tax cut plan is heaven for big businesses


While the world is busy watching Donald Trump prepare to take the oath of office on Friday, much of the more serious policy action is taking place on the other side of Washington, D.C., with Speaker of the House Paul Ryan preparing to take advantage of the total Republican control of the federal government. With a Republican Senate and a Republican President, the Wisconsin congressman may finally get his dream of sweeping tax reform.

As you might guess, based on Ryan’s self-described "free enterprise" worldview, among the biggest winners in his dream world will be big businesses.

One of the key provisions for Ryan’s plan, as outlined in the House GOP's 2016 "A Better Way" policy agenda, is the border adjustable business tax. The essence of this rule would mean that imports will be taxed while exports will be exempt. Why is this good for business? Because businesses can send products wherever they want without having to pay an export tax imposed by the U.S. The tax payment is instead paid by the consumer. The GOP’s document explains it thusly:

"This Blueprint eliminates the existing self-imposed export penalty and import subsidy by moving to a destination-basis tax system. Under a destination-basis approach, tax jurisdiction follows the location of consumption rather than the location of production."

This proposal to shift taxation to the point of consumption, as opposed to our current system that also taxes the point of production, may be one of the toughest for Ryan to enact. He already has a fairly prominent critic: Trump himself. The president-elect said the border adjustable plan was too complicated, according to Politico.

There are other elements of Ryan’s plan for corporate America to remain jazzed about, though. For instance, he wants to allow businesses to write off the cost of new equipment in the first year after the money is spent, rather than five years.

Most importantly, though, is the plan’s proposal to cut the corporate tax rate to a flat level of 20%. This is a reduction from the current flat rate of 35%.

CEOs at major companies can also look for some personal good times from the new plan. Ryan’s agenda will raise the after-tax income of the top 1% of Americans by 5.3%, according to the Tax Foundation, while raising the after-tax income of all tax payers by just 0.7%. In fairness, the Foundation does claim that the after-tax income will raise for all taxpayers by more than 8% when increased gross domestic product is factored in.

Tax reform has been a dream of Paul Ryan for a long time; he’s essentially built his career on it. With things finally tipping his way politically, the speaker may finally see that dream realized.