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As kids, we traded all sorts of things. Baseball cards, magazines, toys, records, rock band belt buckles. I’ll give you my silver Supertramp for your brass Zeppelin! We traded everything. These early life lessons taught us successful trades occurred when each party benefited from the transaction which equaled less black eyes on the playground. As adults in the private sector we now trade goods and services for monetary reward. Governments do not. It’s a vacuum of unintended yet unaccountable consequences where profitable transactions neither matter or are even considered. Congress is filled with politicians who, once elected, immediately forget the basic premises we learned as children. Well, thank goodness we now have the Republicans in power, you say. Those in charge will remedy the unfair economic policies of the past eight years, you say. Not so fast. In a pre-election short interview, fair tax advocate, publisher and once presidential candidate Steve Forbes told us his hopes for a GOP/Trump alliance. Now that alliance is upon us, and as this Forbes article below suggests, he shares his concern over the GOP’s tax policy ‘trade’ of their own, and it will not only not benefit anyone, but it can hurt the party and new President.
FORBES, January 11. OMG! House Republicans Are Preparing To Hit Consumers With A Horrible New Tax That Will Harm Trump And Hurt The Economy
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.
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.
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”.
So, how is this a trade?
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 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. 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.
The rest of the article is here.
Does the GOP plan ‘level’ the playing field as they purport, or will this open up a massive trade war, increase consumer costs and set up the Trump administration for unnecessary economic difficulties and even failure?