Donald Trump’s proposal to lower the corporate tax rate to 15% from 21% for companies that make their products in the U.S. and to expand tariffs on foreign-made goods—which would revive a type of perk that Trump’s 2017 Tax Cuts and Jobs Act eliminated—has elicited immediate questions from economists and businesses. Professor Rebecca Kysar, who served as counselor to the assistant secretary of tax policy in the U.S. Department of the Treasury from 2021 to 2022, was quoted in a Wall Street Journal article discussing the administrative burdens and gamesmanship that could potentially occur.
The old provision led to disputes over what, exactly, counts as domestic production. Congress repealed the domestic-production deduction in the 2017 law, choosing instead to lower the corporate tax rate across the board.
Some economists said Trump’s new proposal would likely spark a similar debate, though they added it was hard to judge the idea without more detail.
“Part of the problem is policing the definition of what constitutes manufacturing,” said Rebecca Kysar, a tax-law expert and professor at Fordham School of Law and a former Treasury Department official in the Biden administration. Under the provision repealed by the 2017 law, companies that wouldn’t normally be thought of as manufacturers were able to take advantage of the break, including Starbucks, because roasting beans qualified as manufacturing, Kysar said.
In one court case, a company that assembled chocolate and cheese for gift baskets was able to argue successfully that this counted as a manufacturing activity and therefore qualified for the break, Kysar added. “There is potentially lots of gamesmanship that companies can take advantage of,” she said.