Posted on 02/15/2017 10:56:38 AM PST by TBP
Republicans in the House of Representatives are inadvertently setting a nasty political and economic trap for Donald Trump. Yes, it’s the Republicans, not the Democrats, who are ready to administer an unnecessary black eye to the new President. That’s not their intention, but it manifestly will be the result.
There has been virtually no debate or public discussion about this new, horrible tax.
The vehicle for this unwitting GOP punch is a new exaction called the border adjustability tax. This levy will cost American consumers at least a trillion dollars over the next ten years. Knowing how Washington politicians calculate these things, you can bet the amount will end up being considerably more. Prices for everyday items, such as socks, shoes and household appliances, will go up. So will tech devices like the iPad, not to mention automobiles and trucks. Gasoline? Millions of Americans will pay an additional 30 cents or more per gallon at the pump. Lower-income and struggling middle-class Americans will get hit the hardest.
Few people are even aware of what the Republicans are getting ready to hit them with. There has been virtually no debate or public discussion about this new, horrible tax, yet in one of those strange fits of collective, self-destructive behavior, numerous GOP lawmakers are ready to enact it.
Here’s how, in essence, this sneaky, anti-consumer tax works. Importers will no longer be allowed to deduct an item as a business expense. To simplify things, let's say a store imports a pair of sneakers for $40 and then sells them for $50, making a $10 profit on which it would owe taxes. Under the Republican plan, however, the retailer wouldn't be able to deduct the $40 it paid for the sneakers. In fact, it would owe taxes on the entire $50! And who, ultimately, pays this tax? You, the consumer, in the form of higher prices or fewer choices of where you can shop. Retailers and their customers will be hit.
Many oil refiners import crude oil to turn into gasoline. This new tax will sharply raise their costs, which will spell pain when you fill up your tank. Worse, some could be forced out of business or have to sharply curtail operations, as drivers cut back on buying the suddenly more expensive fuel.
Companies like BMW, Toyota, Mercedes, Honda, Nissan and Hyundai have major manufacturing operations in the U.S. that employ tens of thousands of workers in good-paying jobs. These companies’ costs will soar because they import numerous parts for the vehicles their workers assemble.
The Loophole of All Loopholes
But wait, it gets worse. Another feature of this bizarre GOP scheme gives exporters a gargantuan tax break by, in effect, not taxing their export revenues. Let's say a corporation sells a piece of machinery to Iran for $5 million, which cost only $4 million to produce. That means $1 million in taxable profit. Under the new Republican scheme, however, that $5 million received from the mullahs wouldn’t be taxable. Instead of a $1 million profit, the corporation, for tax purposes, would have a $4 million loss. Loophole doesn't begin to describe this "tax break."
No wonder companies like Boeing, GE and other big exporters are orgasming over this GOP "reform."
Big breaks for big companies, higher prices for beleaguered consumers. Why are the Republicans doing this? They say the revenue raised will help finance a huge tax cut, such as getting rid of the death tax and the horrific alternative minimum tax, cutting the corporate tax rate from its disastrous 35% to a highly stimulative 20% or less and very meaningfully lightening the tax burden on individuals. These are all extremely exciting ideas and would do wonders for the economy.
A VAT would crush future U.S. economic growth rates, just as it has in Europe and elsewhere.
But enacting a big, brand-new tax to finance cuts in old taxes is a dangerous business, especially in the way the Republicans are going about it. Democrats will gleefully remind voters why prices are going up, conveniently ignoring the tax cuts. Moreover, the GOP border adjustment tax is a but a small step away from a full-blown value added tax, which has financed the bloating of governments around the world. Democrats will someday be back in power, and they won't hesitate to either ramp up this GOP-created tax or go for the VAT. This would be hypocritical--rip apart the Republicans over this tax, and then go on to compound their felony. A VAT would crush future U.S. economic growth rates, just as it has in Europe and elsewhere.
Consider this astonishing fact: In the mid-1960s government spending in Europe as a proportion of their economies wasn't much different from our own. Growth rates matched or exceeded ours. Then Europe discovered the VAT. Spending ballooned and growth slowed to a crawl, consistently clocking in at significantly lower levels than Uncle Sam's.
Republicans also claim their new tax would help exports. In the real world it would do no such thing, as astute tax expert Dan Mitchell has explained (see this and this).
The GOP should drop this tax scheme. Why create unnecessary conflict and damage our new President? Republicans shouldn’t be constrained by the Congressional Budget Office's antiquated way of measuring the economic impact of changes in taxes. Drop the green eye shades, and go for big cuts that would turbo-charge the economy.
Except that tariffs won’t do what you think they will.
If we cut taxes and regulation and hold off forcing wage increases, then we’ll incentivize domestic production and domestic employment.
Like you Steve Forbes is a Free Traitor™. Globalist scare tactics don’t work anymore.
And who do you think is going to pay that tax?
Yes, prices will go up. Not that much but that is the whole point. We know that. We want that. That is good thing. This is a one time adjustment in pricing for slave made labor. Why? Because behind that protective tax wall industry will be able to rebuild. It also takes away the argument that an income tax rate cut need to be paid for. This is additional revenue to offset income tax cuts. Win-win.
“If we cut taxes and regulation and hold off forcing wage increases, then we’ll incentivize domestic production and domestic employment.”
And none of that can ever come close to overcoming their ability to pay some Mexican 8 dollars a day. And if the Mexican ever starts asking for 15 a day, they’ll laugh and relocate to Indonesia, or China. Then if they get uppity, they’ll go to Bangladesh.
It’s a race to the bottom for the third worlders who will never escape a slave wage. It’s destructive to American workers. It only benefits Globalists.
The only way to stop the outsourcing is to make it hurt a little to import, and to generously reward exporting.
We need that tax. We want it. Consumption taxes are far better than income taxes. I want Uncle Sam to get addicted to tariff income. It gets the feds going on the right direction.
The consumers will of course. And I want it to be enough that someone here gets a decent job, and a factory has to be built, and machines have to be built, bought, installed and maintained, and those workers go buy houses, go on vacations, buy shoes, and don’t need welfare.
Slave made shoes being cheap doesn’t matter if our middle class has no Jobs.
A casual look at Germany shows that they value their manufacturing sector and protect it. Why do Germans not outsource their factories?
There is no way to overcome the wage disparity between the USA and the third world without a tariff. It is LONG overdue.
We’ve done fine job-wise. yes, illegals are taking jobs from Americans. So punish the employers with jail time as well as a YUUGE fine and deport the illegals who are working illegally. Cut off ALL benefits of any kind to illegals.
But setting off a trade and wage war with our neighbors is simply going to hurt both economies.
Steve Forbes true globalist colors coming out. What a POS.
Actually, there is. See my post above.
“I want Uncle Sam to get addicted to tariff income.”
Exactly.
I wish Free Traitors™ like you would show us how we are not in a trade war now.
More Free Traitor ™ propaganda.
“We’ve done fine job-wise. yes, illegals are taking jobs from Americans.”
No, we haven’t been doing “fine”. We have full employment in Manhattan, and in the Lobbying industry of DC. And illegals here are a fraction of the damage. We aren’t talking about the jobs taken by illegals here. We are talking about the jobs that leave the borders completely.
Besides, that’s a wash, the illegals have to leave no matter what.
As to your trade war, we are already in one, only we aren’t advocating for OUR side. The foreign governments fight for their nation, and our government and businessmen do too.
Our exports face barriers.
You DO realize Mexico taxes things imported and is very serious about country of origin. I recently spoke to a tech rep. As they attended a show there, they even had to carefully document country of origin of all their swag. Pens, Mugs, lapel pins, etc.
What can possibly be more fair than doing to them exactly what they do you?
Paul Ryan
Over the long haul, we’ve done fine. Teh statist economic policies of teh last 8 years or so have really set us back. But before that (and before teh bank collapse, also caused by government interference), we were doing OK jobwise.
We can get rid of illegal alien jobs by doing what I proposed in my prior post, with no need for a new tax.
This was part of Donald Trump’s campaign promises.
The logic is simple.
Foreign manufacturers are subsidized by their governments and very low labor costs, so they can undercut American manufacturers by dumping their products in the US. This tax is effectively a tariff, so it costs just as much for foreign companies to sell their goods here as it does for US manufacturers.
The reason many manufacturing jobs have left the US is because our manufacturers cannot compete in this unfair market. So this levels the playing field. By itself it makes it far easier to hire American workers and produce products here.
But the flip side is that this law will make it *cheaper* for US manufacturers to export their products. This means far more jobs for Americans.
Steve Forbes is being disingenuous here. He is upset that the wealthiest of billionaires won’t make as much money by investing in foreign companies with cheap labor, so they can dump in the US markets.
Initially, prices on many imported consumer products will go up. However, when American companies start producing and exporting, not only will tax revenues for the government jump up, but the cost of consumer goods made in the USA will go down.
And doesn't have enough jobs, so they have to export people here, and their economy relies on remittances.
Do you want to be like them?
Because Big Labor and Big Business are in cahoots.
Big Labor is one of the main factors driving up labor costs -- along with government regulations and taxes.
this law will make it *cheaper* for US manufacturers to export their products.
No, it won't. It will raise costs. There will be retaliation and it will hurt America's economy and the world's. It will drive prices up and employment down.
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