Tuesday, April 4, 2017

Border Tax Problems

Steve Forbes is right. A labor cost equalizing border tax should not be included in the new Tax Reform bill. The US has not imposed a national sales tax on its citizens and they shouldn’t do it just because Europe does it.  Europe calls it a VAT tax and it is about 20%. The tax would mean revenue to the federal government, but would be cost shifted to US consumers.


We do need to lower the US corporate tax and that should be enough to allow some basic manufacturing to return to the US. The fact that many components and subassemblies are made overseas makes this tax difficult to determine what “unintended consequences” would occur over time.


Bi-lateral trade agreements do need to replace all other US trade agreements, because they can be negotiated to minimize trade deficits. Our current trade deficit needs to be cut in half.  Increasing our oil, gas and coal exports is our best option to cutting our trade deficit the most.


Currency manipulation and theft of intellectual property can also be addressed in bi-lateral trade agreements. China may be interested in ending these practices to expand their sales of unique products or to retain US business in providing cost-effective, labor intensive goods. High volume, highly automated manufacturing is a good bet to return to the US.


Tariffs are useful to impose to keep foreign companies from “buying” the US market with cheap goods. The US imposed tariffs on British furniture (luxury goods) and enabled US citizens to start the US furniture industry. Tariffs can be agreed to in bi-lateral trade agreements.


US energy companies will want the US to sell oil, gas and coal to foreign energy companies if they need it.  In return, potential trading partners may want to sell us their surplus goods. This kind of trading needs to allow uniquely superior products made by foreign companies.


Norb Leahy, Dunwoody GA Tea Party Leader

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