Douglas Holtz-Eakin Says "Don't Worry So Much" - So That Settles it!!

In his "Daily Dish", Douglas Holtz-Eakin, together with Patrick Hefflinger, brings us up to date on "Eakinomics",

Please NOTE - I did not make this up.  He calls it "Eakinomics".  Click on the link and see for yourself.  Is this, possibly, a case of ego gone wild?  I will let you draw your own conclusions.

And IF it is a case of ego gone wild, should we REALLY consider basing our Federal tax system on somebody's ego trip?

I think that's a question worth reflecting on.

Anyhow, back at the ranch, Douglas shares the following news about "Eakinomics":  "To date, the leading proposal for tax reform has been the House 'A Better Way' blueprint, which contains a hotly-debated provision for 'border adjustment.'"

Isn't that an interesting perspective?  The leading proponent is someone other than Mr. H-E himself. It's so modest of Douglas to so generously share the credit.  Any idea why he is deflecting attention in this case??

Fun with words.  Mr. H-E intones:  "Border adjustment would be imposed by excluding all cross-border transactions from the tax base — revenues from exports would not be taxed, while costs from imports would not be deducted. Because cross-border transactions are excluded, their value cannot affect a firm’s tax liability."

Ahem, one kind of cross-border transaction is actually taxed under this wondrous proposal, namely imports.  Imports cross borders, too.  And 97.1% of all U.S. importers are small businesses.  And they are the ones who will be paying the bill for this plan.

Here's the head fake - according to Mr. H-E, we really need to do this . . . because:  "In the absence of this provision, there is huge opportunity for tax avoidance in a territorial system. A firm could sell to a foreign subsidiary goods, services or intellectual property at artificially low prices and then purchase its products at inflated prices. The result would be lightly-taxed foreign profits that could be repatriated back to the U.S. tax-free."

So, there you have it.  Holtz-Eakin is willing to throw us over a cliff because OTHER PEOPLE cheat. Incredibly, the problem cited, transfer pricing, is subject to rules and scrutiny.  Even more outrageous is the notion, flogged by Holtz-Eakin, that gaming to EVADE taxes (not avoid, but evade) through sham transactions is somehow a problem that justifies HIS Border Adjustment tax plan (it's his plan, not the House Republicans' plan).  Sham transactions are illegal.  If Mr. H-E has identified shady transactions that are somehow legit, the Federal government can regulate them and G-d knows, the IRS knows how to audit people.

So I don't accept that this plan is targeted on the real bad guys or that it will be effective in achieving that objective.

What I DO think is that Congress wants to place a tax burden of $120 Billion a year on small business importers to fund tax breaks allocated to other people.  It's among the 97% of taxpayers not paying the Border Adjustment tax that there are "winners" and "losers".  [Trust me, when you realize that some "winners" will never pay Federal taxes again while you must continue to pay taxes, you may have a harder time accepting that the BAT was a good idea.  But by then it will be too late.] Among the small business folks paying the $120 Billion are losers and worse losers.

And you will pay.  Believe me, you will pay.  The payment will come in the form of inflation. And when your dollars shrivel up, I hope you will not forget the term "Eakinomics".  We can all cherish that moniker.  It tells the tale.