Thursday, January 12, 2017

Steve Forbes Tells it Like It Is - The BAT is Bad Policy

Steve Forbes, perhaps not surprisingly in an article in Forbes Magazine, makes the case that the BAT will lead to higher consumer prices, as well as unfair tax results (where exporters that make big profits are effectively exempt from paying taxes, but actually accumulate losses that can be used to gobble up companies like ours - but luckily we're not for sale!).

Forbes notes:  "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."  

In other words, the BAT is a regressive tax because the costs will be passed on to consumers.  I will delve into this issue in a future blogpost, but the point is that the BAT tax will fall on the least able to handle it (it is "regressive" because the highest tax burden falls on those with the lowest income).  It will also disable companies like ours, which I consider to be a pretty high cost.  What have we done wrong?

The loopy argument that this tax proposal will lead to prosperity and growth is dubious, but the price argument is among the most troubling aspect of the lies being told by politicians and economists. 

-     Here is Douglas Holtz-Eakin's pablum:  "According to Douglas Holtz-Eakin, a Republican economist, some of importers’ concerns are overblown, and they aren’t factoring in the benefits they would get from stronger economic growth and the rising dollar. Companies and analysts looking only at what the corporations pay in taxes are analyzing the plan incorrectly, he said. 'Your cost of doing business won’t change,' Mr. Holtz-Eakin said. 'It will consist less of the cost of imports, which will be cheaper, and more in taxes.'”  

-    CNBC reports the conclusion of unnamed economists:  "But economists who support the tax say the policy would lead to a sharp rise in the value of the dollar — anywhere from 20 percent to 25 percent. As a result, retailers' costs will go down so much that it will be a wash to consumers, they say."

-    Rep. Peter Roskam dismisses this as whining by retailers:  "'You move from the stated objections from the retailer community to everybody else,' he said. 'There’s no way to do tax reform in a format that doesn’t run into some objections.'”  [Available on Politico Pro in article called "Roskam defends 'border adjustment' tax-reform plan".]

-     Rep. Kevin Brady from today's The Hill:  "We know that pro-growth tax reform is a major priority for the president-elect. We are eager to work with the incoming Administration to deliver a 21st century tax code that delivers the fairness, economic growth, and international competitiveness that Americans deserve."  In other words, prices aren't going to move.

I will publish an article later today with real world data to substantiate that the BAT will cause prices to rise.  It's not in doubt.  One can question the motives of the folks who are pushing the spin that the BAT will be good for consumers.  

If only we could ask Mr. Smoot or Mr. Hawley what they were thinking, as well . . . .

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