The way it should work, using Forbes'example, is the exporter of a $5 mil. product costing $4mil would pay no business tax, but the $1mil profit would flow through and be taxed as income on the personal return, preferably at a low rate of 13%. All undistributed business income, wages, dividends, are taxed at the same rate so workers and shareholders pay the same rate. If the same product was imported for $4mil and sold for $5mil, the first buyer from the port doesn't deduct the $4mil purchase FOR TAX PURPOSES ONLY. The business side pays 13% on 4mil. Profit and loss are still calculated the same way for accounting purposes (the tax calculation changes only one line item on the income statement: federal tax due) so the 1mil profit is paid on the personal return at 13%. Compared to a domestic good, it is the same taxation. A domestic good will have the 13% tax already embedded (at every stage of production) in the $4mil cost. This doesn't disadvantage imports, it puts them on an even playing field with domestic goods.
As long as investment is exempt, both scenarios create incentives at the margin to locate and invest here.
The root of the problem is that exports are double taxed (US tax code embedded in its cost structure plus a VAT in country of destination) and imports are non taxed (free of VAT in country of origin and not taxed bu US).
If investment is exempt, this is a step toward a consumption tax. A GOOD thing IMHO!
If investment is not exempt, then it won't have much juice.
