I was on Fox Business’ Kennedy last night, talking with the eponymous host about the Republican plan to levy a “border-adjustment tax” on imports. This is part of a larger tax plan, some of which President Trump has said he supports, to cut corporate rates from 35 percent to 20 percent.
Cutting corporate taxes—which are mostly passed along to consumers in the form of higher prices—is a good idea, especially if it also includes a provision to tax companies on a territorial rather than global basis. As it stands, U.S. corporate rates are not only among the highest on the planet, our government taxes American companies on all profits, regardless of where they are earned. American companies get a credit for taxes paid abroad but they also get a bill for the difference between foreign taxes paid and what the U.S. government says is theirs. That’s one reason why companies as diverse as Burger King and Apple park so much of their profits or operations overseas. It’s to avoid high domestic rates.
For a number of reasons, I’m not a fan of border-adjustment taxes. For starters, the scheme is incredibly complicated and does nothing to effect the simplification of taxes, which should be part and parcel of every tax reform. Beyond that, it’s of a piece with the GOP’s growing and stupid protectionist posture to “make America great again” by making life more difficult and expensive for most people. So much produce and so many consumer goods come from abroad any tax hike on them will pick your pocket at Best Buy, Walmart, and Kroger. And while proponents claim the import tax will be mostly paid for by non-taxation of exports and a strengthened dollar (like I said, incredibly complicated), at this point in time, the only acceptable policy all the way around is to cut tax rates and then pay for the trims by reducing spending even more. It’s not as if we have deficits and debt because we’re not raking in enough dough, after all. It’s because we spend too much.
With very few exceptions, the hallmark of the Trump presidency (what are we, like three weeks in?) seems to me to be insularity. His policy-making operations are unpredictable and unknowable and he doesn’t want to have to explain himself. He wants to keep foreign people and goods out of the country. The Republican Party seems extremely happy to play along with all that, especially if its longstanding grudge against immigrants gets taken care of and dollars continue to flow to old people in the form of non-diminished spending on Social Security and Medicare. Free markets might have once been part of the GOP catechism but it seems to been left out of the latest edition of the prayer book. To the extent that Trump and the Republicans insist on closing ranks, closing borders, and closing trade, they absolutely represent a dead end (the Democrats are not any better in this regard, to be sure). We live in a world of forced transparency, where closed systems are increasingly giving way to open ones. Power, meaning, and population are being democratized and dispersed via technology and changes in mind-set and temperament even in the face of Islamic terrorism and other reactionary forces. Political alliances predicated upon exerting more and finer control over what is allowable will be among the biggest casualties. There’s a reason neither the Republican nor the Democratic candidate for president won a majority of the popular vote: Nobody much liked what either one stood for.