Not sure how the House Republicans pick their “winners-and-losers”
when they draft a new tax law. Do
you?
In the case of the so-called “Brady Plan” or Border
Adjustment Tax, named after the estimable Rep. Kevin Brady of Texas, our company
will be trashed. We’re a chosen victim for the crime of making our educational products
overseas. Yes, our company develops toys
and educational materials in Chicago and Los Angeles and owns the intellectual
property in the United States, but makes the products outside our country. This is how our entire industry works – but apparently
that’s baaaaad. Very bad, very sad. It goes without saying that the 150 people who
work here must be bad people, too.
Shame, shame, shame. Luckily, Mr.
Brady plans to correct this by imposing an effective tax rate on our company of
165% of earnings. That should defend the
American Way of Life! As covered in yesterday’s blogpost, the tax mavens will achieve this by taking away the right to
deduct the cost of our goods from our taxable income.
Just to give you a sense of the evils Brady and his cabal
are trying to protect you from, here’s a clip of a couple of our products:
So who have the Republicans chosen as a “winner” under their
new tax law? The Porn Industry! Apparently, good public policy dictates that we
must replace educational toys with pornography.
So we won’t be allowed to deduct the basic economic input that
generates revenue (inventory, made elsewhere) but Merchants of Porn will face no
such restriction. They can deduct the
cost of their basic input – good ole’ American jobs! – and also their expenses
for those fancy location shoots, production costs, and the like. And when they “export” their product, meaning
when they sell it to someone outside the country, they don’t have to declare
that revenue. So they can take full
deductions for everything, even foreign-made cameras they buy locally (giving
them a tax break on the border adjustment tax built into the camera cost), but
don’t even have to declare all of their revenue. And, of course, they get a nice tax rate
reduction. Think of it as a “thank you”
for creating good American jobs!
Back of the envelope, a “S” Corp porn mogul will see his/her
Federal tax rate nominally drop from 39.6% to 25% but if he exports, it gets
even better. Let’s see how the math
works out for a porn production company that exports 10% of its product. [I
made up these numbers – at least I admit it, unlike the economists.]
Current
Law Brady
Plan
Revenue: $100.00 $ 100.00
Labor ($ 40.00) ($ 40.00)
SG&A ($ 40.00) ($
40.00)
Net Taxable
Income $ 20.00 $ 20.00
Deduct
Export Revenues ($ 10.00)
Federal Tax ($ 7.92)
[39.6% rate] ($ 2.50) [New 25% rate]
To recap, the
Federal tax rate on our family business goes from 39.6% to 165% because we make school supplies overseas, and Sleazoid
Porn Mogul’s rate goes from 39.6% to 12.5%.
That’s great public policy!!!
Ah, but what
about Russian porn? Surely there’s something in there for them. [Yech, bad metaphor.] Of course there is! The Internet has no border, so there’s no place to tax intangibles that flow
over the line. Huh? In other words, when a consumer pays for porn
that comes from outside the United States, such as porn from Russia, there is
no border adjustment tax. This is called
a “loophole”. There is apparently no way
to find these cloud-based consumer transactions and therefore no way to tax
them. Although we have been promised a territorial
tax system, so darned efficient and good for America, foreign porn merchants
can send downloads here without any border adjustment tax.
That’s just
for educational toys . . . .
This wass a lovely blog post
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