House GOP business-tax plan upends U.S. policy, bares corporate fault lines
Posted by mminnick 7 years, 4 months ago to Government
"Fault lines inside the corporate world are emerging over a proposed rewrite of the U.S. tax code, pitting importers against exporters.
At the heart of the fight is a Republican plan in Congress that would impose corporate taxes on imports while eliminating them from exports, a move that would upend decades of tax policy.
The proposed shift in effect would curtail existing incentives for U.S. companies to move profits and operations abroad, but it would also pose new challenges for some global businesses. Retailers selling imported products and refiners using imported oil could be hardest hit, while some exporters could see their tax bills vanish."
This is going to be a real fight. It will take some good negotiation to get a good plan through. Hope Trump is ready for the political wheeling and dealing.
At the heart of the fight is a Republican plan in Congress that would impose corporate taxes on imports while eliminating them from exports, a move that would upend decades of tax policy.
The proposed shift in effect would curtail existing incentives for U.S. companies to move profits and operations abroad, but it would also pose new challenges for some global businesses. Retailers selling imported products and refiners using imported oil could be hardest hit, while some exporters could see their tax bills vanish."
This is going to be a real fight. It will take some good negotiation to get a good plan through. Hope Trump is ready for the political wheeling and dealing.
The theory is based on the muscle-mystic premise that physical assets give you "power." (Seize a steel mill and you become an industrialist.) In this case, it was gold. You export sheep for gold, your gold is a hard asset, all shiny. The king can tax the gold and hold it in a treasure chest under his throne. But if you import sheep, you spend gold, sending it out of the country and the nation is "poorer" for the lack of gold. In the 17th century, it was French wine coming in and English sterling going out. All they saw was the coins. No one counted the value in the wine, which was consumed, specifically because it was consumed. They only saw the "hard" assets of silver coin.
The fallacy of mercantilism in its many forms and guises has been exposed and defeated repeatedly. Human Action by von Mises is largely that because the various expressions of mercantilism are so common in economic discussions.
(In the mercantilist view, banking is seen as somehow different from selling shoes. Banks need to be regulated. Gratefully, shoes do not, or we all would be barefoot... except of course if those shoes are imported. Restrictions on imported shoes will, indeed bring us all closer to being barefoot.)
"Exporting jobs" to Mexico or China is one of the latest catch phrases. The mercantilists claim that we do not want to be "dependent on foreign oil" is another.
Yet, among the most prosperous places on Earth are those with near-zero raw materials: Taiwan, Hong Kong, Japan, Netherlands, Denmark, Switzerland.... They import everything. Meanwhile naturally rich regions such as the Congo basin and Siberia remain impoverished, despite their exports.
Peeling away the layers of the fallacy would take us through collectivist labels of "us" versus "them." Racism (nativism) is at root an error in epistemology. But, it has obvious ethical (and therefore economic) consequences.
However, I'd much rather see a very low rate of business tax, if at all, and just rely upon free market competition.
We have no tin or nickel or platinum in the USA. It is all imported. But so is the music of Phil Collins. (In fact, Phil Collins purchased millions of dollars of artifacts from The Alamo, which he then donated to The Alamo. How do you regulate and tax that "fairly"?) Why is a television set from Malaysia taxed, but a board for a TV set made here is not? After all, the complete TV is really just another component in a larger system.
We give depreciation credits to businesses for capital goods. But you do not get the same tax break for your power lawn mower or refrigerator, even though those are capital goods for your own "home business."
The idea that there are "homes" and "businesses" as separate classes of economic entities might be a convenient fiction for economists, but it is, after all, a fiction: we are all businesses.
And every "product" is really a service -- the service of production. Someone can do something better than you. If you buy a suit, it is seen as a product, but if you have a tailor make you one, it is calculated by economists as a "service." You see the fallacy, of course.
There are things that are only produced in one country and no others, (example- electric transformers or the large capacitors we need to protect our grid) so until someone can competitively produce these products here...we should not put a tariff on them.
It was just my response to trumpets plan...not my idea of an ideal.
One thing some big businesses that have cozied up to the Obama White House are not going to like is the elimination of deductions that tend to favor them and make life hard for small businesses. GE will now actually have to pay taxes just like any other business.
Our biggest imbalance is with China, but that may change even without altering the tariffs. China is struggling to become a domestic consumer driven economy, having seen a decline in the export market. The catch 22 there is that Chinese consumers may want foreign products as well, and if we're smart, we'll be doing everything we can to jump on that opportunity.