It’s Fix The Tax Code Friday!
On Thursday, President-elect Trump issued a warning to Toyota via Twitter that the company must “Build plant in U.S. or pay big border tax.”
(For the sake of clarification, according to the New York Times, some of the details in the tweet were not “entirely accurate.” Specifically, Toyota is not planning to build a new Corolla factory in Baja, Mexico, where it already has a factory, but in Guanajuato, Mexico. Additionally, the new factory would not displace any U.S. workers in Toyota’s existing factories.)
Trump had previously indicated that American companies would face consequences if they moved workforces out of the country; he has since claimed credit for decisions made by Carrier and Ford not to relocate factories to Mexico. However, unlike Ford, Toyota is not a U.S. based company but has its headquarters in Toyota City, Aichi Prefecture, Japan. The comments pointed at the car manufacturer are the first Trump has directed at a foreign automaker, marking a potential shift in tax policy.
In an apparent response to the tweet, Toyota released a statement reminding customers that it has been “part of the cultural fabric in the U.S. for nearly 60 years.” The car manufacturer also confirmed that it had made a $21.9 billion investment in the United States. Further, Toyota said that it “looks forward to collaborating with the Trump Administration to serve in the best interests of consumers and the automotive industry.” The car manufacturer indicated, however, that it does not intend to change direction and will proceed with building the new plant in Mexico.
Trump’s comments have caused concern in some circles as the idea of a “border tax” seems at odds with a free market, traditionally a fixture of the Republican economic platform. In response to earlier criticisms involving government interference, Vice President-elect Pence has said, “The free market has been sorting it out and America’s been losing.”
That, of course, brings us to today’s Fix The Tax Code Friday question:
Should the federal government impose a “border tax” or other tax penalty on corporations with offshore operations? If so, should it matter whether the company is a U.S. company or simply a company which does business in the United States?
