Wednesday, February 8, 2017

Daily Signal Highlights the Plight of Small Business under Border Adjustment Tax

The Daily Signal today published an article highlighting the plight of small business under the Border Adjustment Tax proposal.  I was interviewed for the article, which you can read here.

The substance of the article is that the Border Adjustment Tax generated a giant blowback, and House Republicans are sticking to their "Let them eat cake" approach.

In the article, Peter Roskam intones about how dire things are.  You knew that, right?

"'We are not cavalier about the concerns being raised, but the notion of sitting and doing nothing and not addressing fundamentally what’s at issue, which is a tax code that’s pushing manufacturing overseas, would be a lost opportunity,' said Rep. Peter Roskam, R-Ill., the chairman of the House Ways and Means Subcommittee on Tax Policy."

Let me translate:  "I'm not listening."  He continues . . . .

"'So we have two choices,' Roskam told The Daily Signal in an interview. 'We can do nothing, and the tax base will continue to erode, and we will wake up at some point and say what happened, why didn’t we do anything about it. Or we can go to an entirely new system that provides real growth and incentives for manufacturing in America.'”

If indeed the tax base is actually eroding, it is because the U.S. is in denial and assesses a higher corporate tax rate than any other country in the world, other than Chad and the U.A.E.  People are moving to friendlier tax jurisdictions. This is called "tax competition" and has driven down personal and corporate rates across the globe over recent decades.  [Check out the eye popping tax rate declines documented in the linked article.]

Bottom line:  don't relocate your business to Chad or the U.A.E.

I love the part where Peter Roskam tells me that everything is going to be okay:

"Roskam, the Republican congressman from Illinois, says he’s met with Woldenberg, and assured him and other business owners that the border-adjustment tax plan would contain 'transition provisions' that phase in the tax liability that importing companies would face."

This is so tone deaf.  I have specifically discussed transition times with various people associated with this maelstrom and noted that the problems caused by the BAT are not solved by the passage of time.  Our costs will NEVER sink by the prescribed percentage. NEVER. There is no way to avoid huge price increases that will greatly disadvantage our company and our products. Many companies will die.  Automation of the workplace will follow because of the desperate need to eliminate every marginal cost. The infuriating and outrageous tax inequities of the BAT will disappear over time.  A free pass for Boeing will not make life jollier for everyday Americans. Violations of WTO rules will not fade away nor will retaliation by other countries feel better over time.

If Roskam honestly believes that he has cracked the nut with transition periods, he is delusional or profoundly in denial. 

Somebody is going to pay with their job as a result of this law. Will it be me or our employees? That appears to be Mr. Roskam's idea.  

And if he jams this law down the throat of almost 183,000 small business importers, I say it will be his job that goes away.

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