Hunter: Always looking out for America's best interest.
Posted on 06/18/2007 4:48:57 PM PDT by pissant
Presidential hopeful Rep. Duncan Hunter (R-Calif.) says current U.S. tax policy puts American manufacturers at an unfair disadvantage by making it cheaper for foreign products to be sold in the U.S. and costlier for U.S. exporters to ship goods abroad.
Hunter is not alone. An increasing number of lawmakers worried about the expanding trade deficit and what they describe as a disappearing U.S. manufacturing sector believe U.S. tax policies are a part of the problem.
According to Hunter and a number of groups representing textile producers and small manufacturers, the problem is that almost every country in the world has a value-added tax system except the U.S.
In the 137 countries that have value-added taxes, a manufacturer that exports a product gets a rebate from its government equal to the value-added tax rate (VAT). This is intended to make it easier for the company to export the product.
U.S. manufacturers get no such rebate because there is no U.S. VAT. In addition, a U.S. product exported to a foreign country that has a VAT gets hit with the VAT at the border, making it more expensive for the U.S.-produced good to be sold in the foreign market.
“I’ve never met a businessman in America that says that he would have signed up for that deal,” Hunter said at a recent press conference introducing legislation that would have the Office of the U.S. Trade Representative (USTR) enter into negotiations to level the playing field.
“Our different form of domestic taxation has put us at a competitive disadvantage,” added Rep. Bill Pascrell (D-N.J.), who is a cosponsor of the Border Tax Equity Act with Hunter and Reps. Mike Michaud (D-Maine) and Walter Jones (R-N.C.).
The legislation would direct USTR to negotiate with the World Trade Organization (WTO) by January 2009 for a remedy to the tax inequity. If the talks are unsuccessful, the bill would allow the U.S. to impose taxes on imports equal to the exporting country’s VAT.
For example, Hunter said that if China applies a 17 percent VAT on U.S. imports, the U.S. would apply a 17 percent VAT on Chinese imports and provide a 17 percent rebate to manufacturers of U.S. goods being exported to China.
A coalition of labor groups and small manufacturers critical of free-trade policies that have pushed for tough action against China are backing the legislation. They include the AFL-CIO, the National Council of Textile Organizations, the American Manufacturing Trade Action Coalition and the U.S. Business and Industry Council (USBIC).
Even opponents of the bill admit Hunter and his allies have a point. “The core point that there is an inequity is right,” the president of the pro-free trade National Foreign Trade Council (NFTC), Bill Reinsch, told The Hill.
The problem, Reinsch and others say, is that the bill would run afoul of WTO rules prohibiting members from applying different taxes on domestic and imported goods. VAT taxes comply with those rules because they are applied to both domestic goods and imports, although only domestically produced goods that are exported get a tax rebate.
“This solution will be challenged by the Europeans at the WTO, and we will lose,” Reinsch predicted. He noted that previous Congresses have tried different approaches to dealing with inequities in the U.S. and foreign tax systems, and that U.S. laws have repeatedly had to be changed after adverse WTO decisions.
The most recent example occurred a few years ago when Congress approved legislation repealing the Foreign Sales Corporation tax system after Europe imposed retaliatory tariffs on U.S. products.
Adopting a VAT in the U.S. would be WTO-legal, but NFTC’s vice president for tax policy, Cathy Schultz, said this would require a complete overhaul of the U.S. tax system with the VAT replacing the current income tax.
In addition, she said a U.S. VAT would have to be higher than 20 percent to be revenue-neutral. “That would be politically impossible,” she said.
Schultz suggested the best way to address the inequality would be to provide direct corporate tax cuts in the U.S., making companies more competitive in the global market.
Supporters of addressing the VAT inequity acknowledge the new legislation faces an uphill climb. Some note that U.S. companies producing goods overseas and shipping them to the U.S. would be likely to oppose a U.S. VAT, although Reinsch said it was a complicated question that likely would divide business groups.
At a minimum, supporters say the bill will raise awareness in Washington of another problem faced by small U.S. manufacturers. “My first hope is that the bill will pass,” USBIC’s president, Kevin Kearns, said, “but certainly the bill adds pressure in and of itself — whether or not it passes — to do something about our trade deficit.”
Pascrell said he is optimistic that the Border Tax Equity Act will get attention in Congress. “I think we’re going to get a hearing at Ways and Means,” said Pascrell, a member of the committee. But a committee spokesman said no hearings are currently scheduled
Hunter: Always looking out for America's best interest.
Anyone who has ever done the quarterly inventory in a factory understands the problem of how industry is taxed.
Toss in the devaluation of the yuan and its trouble for US manufacturers.
PING
Hunter is a dope. Yes, other countries in effect tax their consumers to support certain industries. We don’t. That doesn’t mean we should.
A VAT is a hidden tax, it is designed so that nobody sees it. Furthermore, just think about what you are taxing. You are taxing “value added”. How stupid do you have to be to know that tax “value added” means that you will get less value added?
Hunter just went way down in my book, pandering to some narrow interests.
Just read that again, and refelct on how stupid it is. It's not like those countries don't have income taxes (i.e. this is not a question of a VAT vs. income tax).
These countries have high taxes across the board. How would adding a new tax (and bear in mind the complexity of the VAT, I thought FReepers were for tax simplificiation) help anyone? So, what, we are going to raise everyones taxes just so that exporters can have their tax rate rebated on export products? How does that help anyone?
This is the dumbest thing I have seen all campaign season. It is too bad that the man championed as the next Reagan has worse ideas about taxation than Hillary and Obama.
Congressman Duncan Hunter, the last sane man standing in Washington D.C.!
Do you know how a VAT works? Right now, on a sales tax, there is no tax placed on an item as it moves from raw material to manufactur to distributor, etc. There is a sales tax on the end. A VAT adds the tax man into every single time value is added in the supply chain. Thus, when the steel is sold to the factory, the IRS takes a cut. When the product is sold to the distributor, the IRS takes a cut, etc. etc. It is a massive complexity.
And besides, how does adding that tax help our exporters?
This is without question the dumbest proposal of the campaign, including the democrats proposals.
You do NOT want a VAT.
Politicians in other countries often use those VATs to raise taxes in disguise, Hunter may be a man of integrity and a tax cutter, but a VAT is opening up a nasty can of worms that will allow for stealth tax increases forever.
Screw the VAT!
Looks like Tancredo just got my vote over Hunter... like it will matter. LOL!
Arioch7
Hunter actually supports the Fair Tax, as opposed to the VAT, though they have similarities. Your libertarian buddy Neal Boortz does too.
The Fair Tax is designed as a replacement to the income tax. Totally different scenario. Besides, if your exporters are disadvataged monetarily, then give them some money or regulatory relief, why tax the rest of us? Hunter has exposed himself as a total fool.
Our different form of domestic taxation has put us at a competitive disadvantage,” added Rep. Bill Pascrell (D-N.J.), who is a cosponsor of the Border Tax Equity Act with Hunter and Reps. Mike Michaud (D-Maine) and Walter Jones (R-N.C.).
The legislation would direct USTR to negotiate with the World Trade Organization (WTO) by January 2009 for a remedy to the tax inequity. If the talks are unsuccessful, the bill would allow the U.S. to impose taxes on imports equal to the exporting country’s VAT.
Hunter is for the FAIR Tax. He is a cosponsor. He wants to shitcan the IRS
Hunter is not calling for a VAT, despite the title.
I have no issue with a USA VAT.
So long as the legislation enabling it repeals the 16th Amendment, it’s okay with me.
OK, well color me guilty of not R’ing TFA. I stand corrected.
No, you have exposed yourself to an inability to read carefully.
See post #19.
Great job as always!
Well, it’s a misleading title because the article conflates tow things. Hunter’s desire to level the playing field and the articles advocacy for a VAT. Sorry for the confusion.
They are polar opposites. The only thing the Fair Tax and a VAT have in common in this context is they are border adjustable.
We don't want a VAT. It would mean taxes would be hidden (as they are now) in prices.
You need to get the word to Duncan that Fair Tax and VAT are opposites - not to ever mix them up. He's lost a good chunk of my support unless/until he clears this up. We do NOT want a VAT.
The author mixed them up, not Hunter. I should have realized this and corrected the assumptions in post #1. Sorry.
Sam, you might want to tell your father that this article makes him look in favor of the VAT and have him make the Hill run a correction.
I don’t know where you get the idea that products in process aren’t taxed. It’s the main reason for doing a quarterly inventory. It’s also the reason a lot of shops try to dump as much inventory as possible immediately before an audit. A lot of factories make inventory disappear into semi trailers or warehouses offsite.
The last factory I worked in had gotten caught hiding inventory so we were subjected to surprise inspections. As a foreman I had to check all my inventory numbers with an IRS auditor who showed up for our year end inventory.
I see. Bad reporting.
Nevertheless, the WTO will not allow taxes to be rebated in our tax system, even if a bill passes Congress and is signed.
WTO will allow VATs to rebate the tax costs. THey would also allow the nrst to have the same effects (rebating exporters their tax costs AND taxing imports).
Why would Hunter call for this when he's an original cosponsor of HR 25?
no worries pissant. you’re doing good work - keep it up
True, but no one expects the Fair Tax to be implemented anytime too soon, so Hunter is going after GATT to let us rebate our current taxes on exports. This author apaprently does not understand this very well.
Because Hunter wants to bust GATT’s balls, for one. HE hates it.
Conflation at its finest. My fault for posting it.
But, Hunter has to know WTO won't even look at this. It's already a no=no.
So why would he propose such while being a cosponsor of HR 25????
The yuan has not be devalued. It’s value was raised a few months ago and there is talk of revalueing it upward.
A VAT is better than our current code. But I would prefer the flat tax or the Fair tax as the replacement.
I have never been an advocate of the value added tax. I have the same doubts as you do as to its equity. However, I think that Rep. Hunter originally meant to tax the imported goods, as China does when she imports our goods.
I’m not sure that he is intent on installing a VAT, if he understands what a VAT entails. This is the first I’ve heard that a VAT is in the offing. This may be a case of confused semantics.
The yuan has been undervalued for years. It was tweaked upward, but I believe it is still pegged to the dollar.
I don’t think Hunter has any intention of a VAT at all. He wants to rebate exporters money under our current tax regimen right now. And his bill is directing the administration to negotiate to make that happen.
I think you are right, pissant. I believe what Hunter is proposing to countries like China is “screw us? screw you!!”
More properly called a tariff. The idea is to force China to NOT to tax our imports, or we will reciprocate.
Hunter does not want GATT telling us what we can and can’t do. It’s a matter of sovereignty as well.
The only condition under which I would be for a VAT, is if it truly meant that income taxes at all levels would be banned.
We definitely do not want a VAT tax, its a terrible idea. What does sound like a good idea, and I would support, would be to impose a tax on imports from countries that tax our exports into their countries. A selective VAT, if you will, that applies only to them. A better word for it would be an import duty.
If China taxes US products at 18%, then any Chinese product should itself be taxed 18% at the gate.
“Hunter does not want GATT telling us what we can and can’t do. It’s a matter of sovereignty as well.”
I agree.
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