Mar 21, 2017

Barron’s: “Kill the Border Tax Before it Kills Us”

Post by Freedom Partners

The tax code is “littered with hundreds of preferences and subsidies that pick winners and losers” and “direct resources to politically favored interests,” says the “Better Way” statement for tax reform authored by House Leaders.

But if you’ve been following the debate over pro-growth tax reform to lower rates for individuals and businesses, broaden the base, and simplify the tax code, the reform plan currently being driven by House leaders should be met with some surprise.

That’s because the plan calls for a new trillion-dollar tax on American consumers, or Border Adjustment Tax (BAT), and supporters of the plan say this is the only way tax reform can get done. In other words, they are calling on hard working Americans to shoulder a trillion-dollar tax hike – while leaving trillions of dollars in wasteful spending, tax loopholes, and corporate welfare untouched – to pay for lower rates.

This would mean a new 20 percent tax on everything imported into the U.S, raising up to $1.2 trillion in the form of higher costs for clothes, gasoline, electronics, and other everyday goods for consumers.

“Anytime I hear border adjustment, I don’t love it … And it’s too complicated,” President Donald Trump told The Wall Street Journal earlier this year.

In fact, U.S. manufacturers would be threatened by increased complexity and disruptions to supply chains, resulting in increased costs, shifting production, and job loss.

That’s why it’s time to cut wasteful spending, not make things more expensive for millions of Americans.

“[T]here are better ways to stanch the bleeding than subjecting the economy to the trauma of a BAT. Despite protestations to the contrary, the border adjustment levy is a tax hike embedded in the program of tax reductions that House Republicans put forward last June,” writes Barron’s economic editor Gene Epstein. “There are, however, better ways to slash the fiscal deficit by $100 billion a year than the Better Way plan, and most fall under the heading of spending cuts,” he adds.

Take, for example, the trillions of dollars in potential spending cuts, tax loopholes, and corporate welfare already identified by Americans for Prosperity that should be considered as alternatives before any new tax hike on consumers.

“Republicans have been calling for pro-growth tax reform and fiscal responsibility for decades – now is an opportunity to do both. Lawmakers should exhaust all other options before saddling consumers with higher costs and tighter monthly budgets. We will continue to vigorously oppose any attempt to impose a new tax on the millions of Americans voted for change. It’s time for Washington to deliver on its promises,” said AFP President Tim Phillips.

President Trump promised tax cuts for Americans, but many could be in for more than they bargained for if Congress and the White House move forward with the new tax hike in lieu of eliminating waste, corporate welfare, and tax carve outs.

“[L]ook at what’s happening with every agency — waste, fraud and abuse. We will cut so much, your head will spin,” President Trump promised on the campaign trail.

The more lawmakers find out about the proposed tax hike, the less they like it – or oppose it altogether.

“The BAT is a bad idea, and it should be scrapped,” says Epstein. We agree. There’s a better way.