Wednesday, January 25, 2017

Border Adjustment Tax Targets Small Business

If you feel you're not getting the full story when House Republican leaders talk about their tax plan, you are right.   The Brady Plan has been framed to sell it, and as a result, they have you pointed in the wrong direction.  

Frame:  They say we are "losing" because virtually all other companies provide tax rebates at the border, but we tax our products instead.

Answer:  Debunked numerous times here.  VAT is not an export subsidy, and corporate taxes take place everywhere.  OUR taxes are higher than everyone else's but this has nothing to do with VAT.

Frame:  They say this tax is simplified.

Answer:  The BAT is inherently complex and unpredictable because the tax base diverges from any concept related to profit.  Taxes turn on other, sometimes idiosyncratic terms, where taxes can skyrocket or disappear unrelated to the presence or absence of profit.

Frame:  The BAT is the "cornerstone" of the Brady Plan and no tax reform is possible without it.

Answer:  Well, they certainly want your money.  To give you everything else, they need that money so they can avoid doing it some other way.  That's the reality - the BAT is necessary if they are to avoid having to prepare a different combination of benefits and costs, and savings.

Frame:  Opponents to the plan are exaggerating and are Special Interests.

Answer:  I can't speak for others but I provide my data sources and show my math.  I make mistakes like others, but one thing I won't do is lie.  If I am mistaken or somehow "exaggerating", please rebut me here. I'll publish your expose.

And as to the Special Interests, I am "special", at least according to my mother. But you should know who the "special" people are who will bear the brunt of this tax. Surprise - it's your neighbors!  The target is Small Business.   Consider:

Number of Employer Businesses in the U.S. (2012):  5.73 million
Percent of Small Businesses in total businesses:  99.7%
Number of U.S. importers (2014):  187,825
Number of Small Business Importers (2014):  182,371 
    (97.1% of all importers and 3.2% of overall businesses)
Total Imports (2014):  $2.058 Trillion
Total Small Business Imports (2014):  $643 Billion

To recap, 97.1% of importers are Small Businesses and they themselves are only 3.2% of all employer businesses.  That's a very small, fragile group of businesses, usually the biggest job creator group in the U.S. and comprised largely of family and entrepreneur-run businesses.  That's who is going to pay the cost of this tax.

The BAT is projected to earn $120 Billion per year over the next ten years.  It's interesting that 20% of the Small Business Imports is also about $120 Billion.

For House Republicans who think this is not relevant to them, consider the math for your district, (totals, divided by 435):

419 Small Business Importers (1-499 employees).  
Estimated worker headcount of 80,000-125,000 per Congressional district.
Total Small Business Imports annually:  @$1.5 Billion
Total Small Business BAT annually:  @$300 Million

So what Mr. Brady isn't telling you and what he hopes you'll never figure out is that he is planning to soak family businesses to give other businesses a break. This is his great innovation.  He cloaks it in nationalistic nonsense and blather about tax inequities he can't substantiate.  But we can substantiate who will be paying this tax. Small businesses, family businesses and entrepreneurs.  You.

I think that's rotten.  I think Brady needs to respond to this concern immediately and set the record straight.

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