In today's New York Times, William T. Jones, Chairman and CEO of family-controlled Cummins Allison, explains why he supports the BAT. I don't know him but believe he is stating his views candidly and clearly. The problem is that he's wrong in several important respects. He repeats the urban myths and simple nonsense of Kevin Brady and Paul Ryan. Given the size and scale of his business empire, Mr. Jones has no excuse for his failure to know what he's talking about.
Urban Myth No. 1: "In general, it’s a good idea to shift the United States tax system toward consumption as opposed to production, which a border-adjustment tax would do. More than 150 of America’s trading partners currently impose consumption taxes, or “value added” taxes, of up to 25 percent on American exports. This means that American-made exported goods are burdened with the costs of American taxes as well as those of foreign taxes. Our foreign competitors face no such consumption tax when entering the American market, but they enjoy value-added rebates from their home countries, which help lower their prices in our market."
Three ideas are expressed here. First, America's trading partners impose VAT on American exports. That is true, but they apply VAT to ALL products, not just imported products. If Cummins-Allison is competing against a local product, both the imported and domestic products are assessed VAT. This tax is neutral to everyone for this reason.
Second, Jones asserts that our products are bearing the burden of American taxes as well as foreign taxes. Again, no prejudice against American products here. He is referring to American corporate taxes as the "American taxes". Corporate taxes are assessed in VAT jurisdictions typically, so this burden is felt everywhere. As noted above, American products do not bear a special VAT burden not felt by other products in VAT jurisdictions.
Notably, American corporate taxes are very high. That's our own fault. It is not a structural problems in our system of taxation.
Third and finally, Jones asserts that border adjustment in VAT jurisdiction is some sort of subsidy. I have debunked this numerous times. See these articles for details: January 12, January 15, January 18, and February 16, This is an urban myth and is just not true.
Urban Myth No. 2: "Although my costs would rise somewhat because I have to import certain components that are no longer made domestically, the border tax would compensate for that loss by canceling out the tax-rebate advantage currently enjoyed by my foreign competitors."
As noted, the so-called "tax-rebate advantage" does not exist. If it did, my company would be receiving it, and it is nowhere to be found on our books. We have a UK affiliate which exports out of the EU. If the tax rebate (border adjustment) in VAT jurisdictions is some kind of subsidy, we would have at least 20 years of accumulated subsidy in our bank account and on our audited financial statements. We don't. This is an urban myth and Mr. Jones doesn't know what he's talking about.
Simple Nonsense No. 1; "Those who object to the border-adjustment proposal — chiefly retailers who sell imported goods — claim that there will be exorbitant price increases for consumers. But there is reason to think any such increases would be smaller than critics suggest, as the tax would be applied only to the (lower) wholesale price at the border, not to the (higher) retail price in their stores."
This is ridiculous because Mr. Jones apparently believes that the Border Adjustment Tax will have to be passed along to consumers, but fails to recognize that the price charged for the heavily taxed imported products will be marked up at each level of distribution, just like a VAT. The math dictates that the price increase will be as large as the terrified importers can steel themselves to impose, converging on the 20-25% increase in costs that they experience.
Urban Myth No. 3: " . . . perhaps those higher prices could be mitigated for lower-income Americans by a tax credit phased out over, say, three years — during which time retailers should be able to find or help establish American suppliers to meet their needs at lower cost."
We have not been able to find a single factory able to produce any of our products at a competitive cost since we began trying in 2013. Bananas aren't grown in this country, Bordeaux wine comes from France, Corona beer from Mexico, and cut-and-sew products like shoes and apparel are never going to come back to a high value-added manufacturing economy like ours. As I have pointed out in prior blogposts, if manufacturing does come back, it will be robotic. Car manufacturing by people is an outmoded idea. Mr. Jones' assertion is a myth.
Simple Nonsense No. 2: "If the W.T.O. — principally a bureaucratic collaboration of America’s competitors — were to reject an American border-adjustment tax, it might well be time for the United States to re-evaluate its relationship with that organization."
Maybe we should move away from the WTO and maybe we shouldn't, but that's sort of irrelevant here. If we breach these contracts and treaties, we will likely start a trade war. The WTO may be a sideshow. Time to wake up and smell the coffee!
Mr. Jones caps his analysis off with a summary of the Ryan/Brady fictions and mythology: "Theoretically, tax systems should collect revenue efficiently and distort markets as little as possible. But in an age of large-scale market distortion driven in part by the consumption taxes of our foreign competitors, why should American companies like mine be unilaterally disadvantaged because of misplaced fealty to an idealized tax system?"
The notion that "large-scale market distortion" is being driven by VAT systems is unsupported and unsupportable. Job losses in this country are not being driven by taxes. Jobs move off-shore as companies seek more efficient manufacturing, allowing their products to sell at lower prices. The constant shifting of resources in an economy creates opportunity. It's not a one-way street. By lowering the cost to produce, companies open up new markets previously unreachable at the old, higher costs. New jobs are created as a result. Very often, these jobs pay much more than the low-skill jobs that were displaced.
We have to move away from a fear-based view of the economy. We must embrace the vibrancy of an economy where capital can flow across borders and where the rules encourage efficiency for everyone's benefits. Jobs may shift as a result, but that does not mean that we will stop creating jobs for Americans. We have an enviably strong economy. If things were so bad, how would that be possible?
Let's hope Congress sees through this smoke screen.
Thursday, March 30, 2017
Trump Shows Why His Influence Will Not Push the BAT Through the House or the Senate
Bargaining, among other things, requires some form of trust. Whether it's an uneasy trust (Reagan's "Trust but Verify") or a trust based solely on negative incentives, fundamentally bargaining requires confidence. What happens to you if you choose to cooperate - are you subject to betrayal?
Paul Ryan, what do you say?
Over a period of only a few days, Trump swung from one extreme to another with the Freedom Caucus. Before the healthcare vote, he threatened: "President Donald Trump was 'having fun' when he told the leader of the House Freedom Caucus that he would come after him for not supporting the Obamacare replacement plan, White House press secretary Sean Spicer said Tuesday. 'Mark Meadows is a longtime, early supporter of the president,' Spicer told reporters at Tuesday’s briefing. 'He had some fun at his expense this morning during the conference meeting.' . . . 'But he has made it very clear that he was having fun with him,' Spicer claimed. 'The president’s committed to making sure that this gets passed.'”
Earlier in March he coo'ed: "When we spoke on the morning of March 7, Trump assured me that he would not bully the Obamacare-replacement bill’s loudest Republican critics, like the Freedom Caucus chairman, Representative Mark Meadows, on Twitter: 'No, I don’t think I’ll have to,' he said. 'Mark Meadows is a great guy and a friend of mine. I don’t think he’d ever disappoint me, or the party. I think he’s great. No, I would never call him out on Twitter. Some of the others, too. I don’t think we’ll need to. Now, they’re fighting for their turf, but I don’t think they’re going to be obstructionists. I spoke to Mark. He’s got some ideas. I think they’re very positive.'"
So what is it - friend or foe? Maybe that's not even the right question. A better and more interesting question is whether Trump is a worthy trading partner. Presumably, his erratic and passive-aggressive behavior has triggers that go beyond an individual transaction. In other words, pleasing him now is no guarantee that you will enjoy his loyalty or support at any given point in the future. If so, why trade with him? Why take his threats particularly seriously? You were probably subject to the same threat already. Given his impetuous and judgmental behavior, you have no way to insulate against his threats. Why bother trying?
Under these circumstances, his threats seem hollow, and his influence waning. This is apparent to more people that just 535 Members of Congress. Notably, the electorate is watching and paying closer attention than in recent memory.
Trump will not be able to bring back the "opt-outs" on the Ryan/Brady tax reform plan. They need a Plan B before their record of failure makes any further progress impossible and careers become endangered.
Paul Ryan, what do you say?
Trump has proven again and again that he is impatient, impetuous, temperamental and vindictive. While that may be what the voters knew they were getting, "drain the swamp" or whatever, it is not the makings of a great bargaining position with Members of Congress incentivized to do their own thing.
Trump doesn't start from a position of strength. He is in the midst of a historic popularity plunge and has no credible plan to reverse it. He was elected by a newly-formed conservative alliance, a group with no record of exercise of political power, but can't gain the support of Congressional conservatives. In desperation, he is now attempting to cultivate Democrats. Without the coercive force of a reliable coalition, Trump is naked and alone. And finally, Trump continues to make outlandish claims that strain credibility or resorts to outright lies, all with apparent impunity. How long will the free pass last?
Under these circumstances, who would trust Trump with his/her vote in exchange for a promise?
If you continue to believe in the myth of Trump's political power, consider today's "threat" made against the Freedom Caucus. He tweeted out a promise to campaign against them today:
The Freedom Caucus will hurt the entire Republican agenda if they don't get on the team, & fast. We must fight them, & Dems, in 2018!— Donald J. Trump (@realDonaldTrump) March 30, 2017
Over a period of only a few days, Trump swung from one extreme to another with the Freedom Caucus. Before the healthcare vote, he threatened: "President Donald Trump was 'having fun' when he told the leader of the House Freedom Caucus that he would come after him for not supporting the Obamacare replacement plan, White House press secretary Sean Spicer said Tuesday. 'Mark Meadows is a longtime, early supporter of the president,' Spicer told reporters at Tuesday’s briefing. 'He had some fun at his expense this morning during the conference meeting.' . . . 'But he has made it very clear that he was having fun with him,' Spicer claimed. 'The president’s committed to making sure that this gets passed.'”
Earlier in March he coo'ed: "When we spoke on the morning of March 7, Trump assured me that he would not bully the Obamacare-replacement bill’s loudest Republican critics, like the Freedom Caucus chairman, Representative Mark Meadows, on Twitter: 'No, I don’t think I’ll have to,' he said. 'Mark Meadows is a great guy and a friend of mine. I don’t think he’d ever disappoint me, or the party. I think he’s great. No, I would never call him out on Twitter. Some of the others, too. I don’t think we’ll need to. Now, they’re fighting for their turf, but I don’t think they’re going to be obstructionists. I spoke to Mark. He’s got some ideas. I think they’re very positive.'"
So what is it - friend or foe? Maybe that's not even the right question. A better and more interesting question is whether Trump is a worthy trading partner. Presumably, his erratic and passive-aggressive behavior has triggers that go beyond an individual transaction. In other words, pleasing him now is no guarantee that you will enjoy his loyalty or support at any given point in the future. If so, why trade with him? Why take his threats particularly seriously? You were probably subject to the same threat already. Given his impetuous and judgmental behavior, you have no way to insulate against his threats. Why bother trying?
Under these circumstances, his threats seem hollow, and his influence waning. This is apparent to more people that just 535 Members of Congress. Notably, the electorate is watching and paying closer attention than in recent memory.
Trump will not be able to bring back the "opt-outs" on the Ryan/Brady tax reform plan. They need a Plan B before their record of failure makes any further progress impossible and careers become endangered.
Tuesday, March 28, 2017
Anti-BAT Coalition Publishes Video about the Impact of Proposed Tax Reform on Learning Resources, Inc.
I was featured in Politico today in an article about the BAT. The video mentioned is embedded below.
"NO, WE DIDN’T FORGET ABOUT BORDER ADJUSTABILITY: The border adjustment tax in the House GOP’s blueprint remains the most controversial part of the tax reform debate right now, and there are signs that the framework is still struggling to gain traction. The latest: Rep. Mike Kelly (R-Pa.), a Ways and Means member who’s been publicly skeptical about border adjustability because of his history as a car dealer, flat out said he was opposed to the idea on Fox Business on Monday. (Full disclosure: Kelly was asked specifically about a border tax, but the conversation seems to be about border adjustability.) Americans for Affordable Products, the coalition opposing the border adjustment, also has a new video featuring Rick Woldenberg, the chief executive for an Illinois toy maker called Learning Resources. Woldenberg, who’s been a rather vocal opponent of the House plan, says that a border adjustment would make his business unprofitable."
Putting aside my fifteen minutes of fame, the part of Mike Kelly is really interesting. As has been reported in this space, Republicans on the Ways and Means Committee have apparently been threatened by losing their seat on this powerful committee if they stop supporting the BAT. Devin Nunes clearly has been very cooperative on this score . . . . Kelly is a car dealer from Pennsylvania and is a Republican member of Ways and Means. He has long been rumored to be against the bill, but now he's out in public and telling people on camera:
Yes, you heard that right. When asked if he was "for a border tax", Kelly replied:
“No, I’m not because you know what, I am a bill guy, Maroney Label, which I’ve watched for years on the side of a car, shows not only the equipment on a car and price of a car, but it also shows parts content. And when you look at global parts supplies, you know they come from all over the world. Sometimes little things built in one part of the world go in to big things built in Detroit and everything else. So, I always look at how it’s constructed. Don’t go flying off the handle. It’s not made here. I’m not buying it. You know what? If that’s the truth, you’re not going to buy very many things anymore because it takes the whole world now with that global supply chain to build the finished product. So, it’s incredibly important we understand how things are made as opposed to just making statements and then going back later on and saying, oh, I didn’t really understand that. You know what? Get your head out of that place where it’s so hard to breathe and look at things. Look at it.” [Emphasis added]
Whoa. He really said that. So WHY did he say that? Two theories: First, he senses disarray and weakness in House Republican leadership (you know who I mean) and is playing the chess game out a few moves. He's getting out there first so he can claim the higher ground.
A second, perhaps more compelling theory: He was TOLD to do this. He's floating a trial balloon for Ryan and Brady. If so, this is the leading edge of the death of the BAT.
Be still, my heart.
And there's other reason to believe it's cratering. Look at this outpouring of negative press:
Chris Wallace: "You've also have a big split in the Republican Party because Speaker Ryan wants this Border Adjustment Tax which would tax imports, not exports, and there are a lot of Republicans who say 'no way'".
Jim Crmaer: "But you know what, if they're going to make the debate the border tax then we're going to be talking about this thing for a long time, it’s not going to work.”
Bloomberg's Kevin Cirilli: "But then you talk to members of the House Freedom Caucus, you talk to other conservatives in the Senate who feel that the Border Adjustment Tax is a non-starter issue. So, all of this of course comes on the backdrop as Russia hearings in the Senate and the House are going to continue and Republicans on those committees continue to raise questions. That of course could weaken this administration’s political capital as it looks to pivot to tax reform after a devastating loss on health care.”
FOX Business Network’s Stuart Varney: “At this point, the Border Adjustment Tax Is the divide within the Republican Party, which Is putting the whole tax reform effort In jeopardy.”
And as if that's not bad enough, there's this -
CNBC’s Ylan Mui: “One source tells me that fiefdoms within the administration have been working on pieces of a tax plan, but there’s no cohesion yet, and there are three big questions that still need answers. The first one is border adjustment. The head of the House Freedom Caucus, and that’s the group that just took down health care, he doesn’t want it to be part of tax reform. Meanwhile, the number of Senators who are skeptical of it keeps growing. Second is whether corporations should be able to deduct interest payments, getting rid of that benefit is critical to financing the cut of the top line corporate tax rate from 35 to 20 percent, so the existential issue here is whether tax reform needs to be revenue neutral. Do any tax cuts need to be offset with revenue from somewhere else? Guys, mark your calendar, April 28th is the new date to watch. That's the deadline to pass a bill that would keep the government running through the end of this fiscal year, and that will give us clues about whether or not Republicans can actually work together.” [Emphasis added]
So you have to wonder why Mike Kelly chose today to come out against the BAT. To my knowledge, he is the first Republican on Ways and Means to take this stance directly in contravention of Kevin Brady (aww!). What does it mean? Stay tuned!
"NO, WE DIDN’T FORGET ABOUT BORDER ADJUSTABILITY: The border adjustment tax in the House GOP’s blueprint remains the most controversial part of the tax reform debate right now, and there are signs that the framework is still struggling to gain traction. The latest: Rep. Mike Kelly (R-Pa.), a Ways and Means member who’s been publicly skeptical about border adjustability because of his history as a car dealer, flat out said he was opposed to the idea on Fox Business on Monday. (Full disclosure: Kelly was asked specifically about a border tax, but the conversation seems to be about border adjustability.) Americans for Affordable Products, the coalition opposing the border adjustment, also has a new video featuring Rick Woldenberg, the chief executive for an Illinois toy maker called Learning Resources. Woldenberg, who’s been a rather vocal opponent of the House plan, says that a border adjustment would make his business unprofitable."
Putting aside my fifteen minutes of fame, the part of Mike Kelly is really interesting. As has been reported in this space, Republicans on the Ways and Means Committee have apparently been threatened by losing their seat on this powerful committee if they stop supporting the BAT. Devin Nunes clearly has been very cooperative on this score . . . . Kelly is a car dealer from Pennsylvania and is a Republican member of Ways and Means. He has long been rumored to be against the bill, but now he's out in public and telling people on camera:
Yes, you heard that right. When asked if he was "for a border tax", Kelly replied:
“No, I’m not because you know what, I am a bill guy, Maroney Label, which I’ve watched for years on the side of a car, shows not only the equipment on a car and price of a car, but it also shows parts content. And when you look at global parts supplies, you know they come from all over the world. Sometimes little things built in one part of the world go in to big things built in Detroit and everything else. So, I always look at how it’s constructed. Don’t go flying off the handle. It’s not made here. I’m not buying it. You know what? If that’s the truth, you’re not going to buy very many things anymore because it takes the whole world now with that global supply chain to build the finished product. So, it’s incredibly important we understand how things are made as opposed to just making statements and then going back later on and saying, oh, I didn’t really understand that. You know what? Get your head out of that place where it’s so hard to breathe and look at things. Look at it.” [Emphasis added]
Whoa. He really said that. So WHY did he say that? Two theories: First, he senses disarray and weakness in House Republican leadership (you know who I mean) and is playing the chess game out a few moves. He's getting out there first so he can claim the higher ground.
A second, perhaps more compelling theory: He was TOLD to do this. He's floating a trial balloon for Ryan and Brady. If so, this is the leading edge of the death of the BAT.
Be still, my heart.
And there's other reason to believe it's cratering. Look at this outpouring of negative press:
Chris Wallace: "You've also have a big split in the Republican Party because Speaker Ryan wants this Border Adjustment Tax which would tax imports, not exports, and there are a lot of Republicans who say 'no way'".
Jim Crmaer: "But you know what, if they're going to make the debate the border tax then we're going to be talking about this thing for a long time, it’s not going to work.”
Bloomberg's Kevin Cirilli: "But then you talk to members of the House Freedom Caucus, you talk to other conservatives in the Senate who feel that the Border Adjustment Tax is a non-starter issue. So, all of this of course comes on the backdrop as Russia hearings in the Senate and the House are going to continue and Republicans on those committees continue to raise questions. That of course could weaken this administration’s political capital as it looks to pivot to tax reform after a devastating loss on health care.”
FOX Business Network’s Stuart Varney: “At this point, the Border Adjustment Tax Is the divide within the Republican Party, which Is putting the whole tax reform effort In jeopardy.”
And as if that's not bad enough, there's this -
CNBC’s Ylan Mui: “One source tells me that fiefdoms within the administration have been working on pieces of a tax plan, but there’s no cohesion yet, and there are three big questions that still need answers. The first one is border adjustment. The head of the House Freedom Caucus, and that’s the group that just took down health care, he doesn’t want it to be part of tax reform. Meanwhile, the number of Senators who are skeptical of it keeps growing. Second is whether corporations should be able to deduct interest payments, getting rid of that benefit is critical to financing the cut of the top line corporate tax rate from 35 to 20 percent, so the existential issue here is whether tax reform needs to be revenue neutral. Do any tax cuts need to be offset with revenue from somewhere else? Guys, mark your calendar, April 28th is the new date to watch. That's the deadline to pass a bill that would keep the government running through the end of this fiscal year, and that will give us clues about whether or not Republicans can actually work together.” [Emphasis added]
So you have to wonder why Mike Kelly chose today to come out against the BAT. To my knowledge, he is the first Republican on Ways and Means to take this stance directly in contravention of Kevin Brady (aww!). What does it mean? Stay tuned!
Okay, Everyone Line Up Behind Kevin Brady for the BAT . . . Guys? Guys? Where is Everyone???
So what happened last week, and how does the crushing defeat in healthcare reform legislation affect the BAT?
Last week. we witnessed what happens in a political vacuum where the leaders are weakened, and the governing coalition (so to speak) has little incentive to bargain or cooperate. And in this case, the legislation was poorly-conceived and unpopular. It's really that simple, and you saw the predicted fracturing of the House Republicans. The implications for the anti-BAT folks are excellent.
The failure of the Republicans to even take a vote on the TrumpCare legislation tells you a lot. I do not believe the modest projected shortfall in votes. The media says there were about 30-odd holdouts, but I think without a vote, we will never know. I personally believe that it would have been very hard for rank-and-file moderates to vote for this legislation, or anyone for that matter. Even committee votes are now fodder for midterm campaigns. Who would want to put their name on a bill that removes insurance from a staggering 24 million people?
This speaks to the amazing political miscalculations made by Paul Ryan and presumably his sidekick, the estimable Kevin Brady. They seemed to believe that by shamelessly cozying up to Mr. Trump, they would achieve two things: (a) benefit from his political pull based on his November election victory and (b) neutralize the effort by conservatives to oppose the bill. They must have believed that the conservatives would never dare vote against something supported by Trump.
Oops.
So why did the conservatives take this hard stance against the conservative Mr. Trump? I personally think it was a power grab. Now they can call the shots in future battles by staying united. Of course, you also have to consider that Mr. Trump has managed to achieve a lower approval rating in 64 days than Obama did in eight years as President. Trump is sinking deeper into the abyss by the day.
Trump clearly had no idea how to build a coalition or hold one together, and it turns out that bullying is not the winning approach. Why? Two reasons: first, Trump's bargaining position was contingent on being able to deliver something in exchange for votes. Clearly, he cannot do that, so why would anyone trade with him? If Trump can't keep his promises because he has no way to deliver, he loses all bargaining authority. Second, Trump is not trustworthy. He clearly coaxed Paul Ryan to come to his side and ally with him, and then when it didn't work out, he threw him under the bus. So who will trust him when you know this is possible?
No one.
This leaves Paul Ryan wounded. He looks like a policy wonk who isn't accountable for delivering votes. His legislative strategy was paper thin and poorly conceived, putting his Republican colleagues at tremendous risk. He said he was excited about the CBO report. Need I say more?
Trump and Ryan need a big win now to encourage folks to believe they can lead and deliver results. Given the above, it's hard to believe anyone will follow them if any risk is involved.
The Border Adjustment Tax proposal has everything going against it now. The law favors massive companies over family businesses, and is highly inflationary. It also constitutes a massive tax hike (face it), and involves a big gamble on macro economics that have never been tried before. Anywhere. No one knows if it will work. The arguments made to support the BAT involved obvious mischaracterizations and at times, outright lies. Ryan and Brady haven't fooled anyone. And finally, the proposal has been highly controversial and risky from day one, having split the business community down the middle.
Ryan and Brady blew healthcare in part because they spent so much political capital on this loser idea. They were on TV endlessly for two months straight plugging this terrible idea and brushing off complaints all the while saying that they were listening. As recently as last week, Brady robotically reaffirmed on TV that it was a "given" that the BAT would be part of the tax reform bill. He knows perfectly well that the BAT won't get through the Senate and yet he remains committed to insisting that his Republican colleagues take HUGE political risks in voting for this very unpopular proposal.
Either Ryan and Brady have a learning disability, or they must be considering alternatives. In the wake of the healthcare debacle, they can't take risks, and will NEVER be able to sell a bill of goods again. The dull thud of the healthcare failure is a sound no one will listen to again.
The Republicans have a strong incentive to show they can get something, anything, done now. Having staked themselves to tax reform as their next big challenge, they MUST drop the BAT and concentrate their limited remaining resources on something that will pass. The BAT will inevitably fail, and if Brady and Ryan push it to the limit, they will go down the drain with it.
Life is full of choices . . . .
Last week. we witnessed what happens in a political vacuum where the leaders are weakened, and the governing coalition (so to speak) has little incentive to bargain or cooperate. And in this case, the legislation was poorly-conceived and unpopular. It's really that simple, and you saw the predicted fracturing of the House Republicans. The implications for the anti-BAT folks are excellent.
The failure of the Republicans to even take a vote on the TrumpCare legislation tells you a lot. I do not believe the modest projected shortfall in votes. The media says there were about 30-odd holdouts, but I think without a vote, we will never know. I personally believe that it would have been very hard for rank-and-file moderates to vote for this legislation, or anyone for that matter. Even committee votes are now fodder for midterm campaigns. Who would want to put their name on a bill that removes insurance from a staggering 24 million people?
This speaks to the amazing political miscalculations made by Paul Ryan and presumably his sidekick, the estimable Kevin Brady. They seemed to believe that by shamelessly cozying up to Mr. Trump, they would achieve two things: (a) benefit from his political pull based on his November election victory and (b) neutralize the effort by conservatives to oppose the bill. They must have believed that the conservatives would never dare vote against something supported by Trump.
Oops.
So why did the conservatives take this hard stance against the conservative Mr. Trump? I personally think it was a power grab. Now they can call the shots in future battles by staying united. Of course, you also have to consider that Mr. Trump has managed to achieve a lower approval rating in 64 days than Obama did in eight years as President. Trump is sinking deeper into the abyss by the day.
Trump clearly had no idea how to build a coalition or hold one together, and it turns out that bullying is not the winning approach. Why? Two reasons: first, Trump's bargaining position was contingent on being able to deliver something in exchange for votes. Clearly, he cannot do that, so why would anyone trade with him? If Trump can't keep his promises because he has no way to deliver, he loses all bargaining authority. Second, Trump is not trustworthy. He clearly coaxed Paul Ryan to come to his side and ally with him, and then when it didn't work out, he threw him under the bus. So who will trust him when you know this is possible?
No one.
This leaves Paul Ryan wounded. He looks like a policy wonk who isn't accountable for delivering votes. His legislative strategy was paper thin and poorly conceived, putting his Republican colleagues at tremendous risk. He said he was excited about the CBO report. Need I say more?
Trump and Ryan need a big win now to encourage folks to believe they can lead and deliver results. Given the above, it's hard to believe anyone will follow them if any risk is involved.
The Border Adjustment Tax proposal has everything going against it now. The law favors massive companies over family businesses, and is highly inflationary. It also constitutes a massive tax hike (face it), and involves a big gamble on macro economics that have never been tried before. Anywhere. No one knows if it will work. The arguments made to support the BAT involved obvious mischaracterizations and at times, outright lies. Ryan and Brady haven't fooled anyone. And finally, the proposal has been highly controversial and risky from day one, having split the business community down the middle.
Ryan and Brady blew healthcare in part because they spent so much political capital on this loser idea. They were on TV endlessly for two months straight plugging this terrible idea and brushing off complaints all the while saying that they were listening. As recently as last week, Brady robotically reaffirmed on TV that it was a "given" that the BAT would be part of the tax reform bill. He knows perfectly well that the BAT won't get through the Senate and yet he remains committed to insisting that his Republican colleagues take HUGE political risks in voting for this very unpopular proposal.
Either Ryan and Brady have a learning disability, or they must be considering alternatives. In the wake of the healthcare debacle, they can't take risks, and will NEVER be able to sell a bill of goods again. The dull thud of the healthcare failure is a sound no one will listen to again.
The Republicans have a strong incentive to show they can get something, anything, done now. Having staked themselves to tax reform as their next big challenge, they MUST drop the BAT and concentrate their limited remaining resources on something that will pass. The BAT will inevitably fail, and if Brady and Ryan push it to the limit, they will go down the drain with it.
Life is full of choices . . . .
Monday, March 27, 2017
Border Adjustment Clips March 27, 2017
More clips for you!
Americans for Affordable Products: Americans for Affordable Products Grows to More Than 400 Strong 3-27-17
Fox Business: Forbes: Border Adjustment Tax is a "hidden tax that would slam consumers" 3-27-17
Breitbart.com: Paul Ryan: Failure of Obamacare Replacement Makes Tax Reform Harder 3-25-17
Business Insider: Here's the next hill Trump, Ryan and House Republicans could die on 3-25-17
Fox News: Krauthammer: Unless GOP Substitutes BAT, "They Ought Not Venture Into This" on Tax Reform 3-25-17
AZCentral: Sen. John McCain slams border-tax proposal 3-24-17
Reuters: How a border tax could divide Boeing and its suppliers 3-24-17
Bloomberg: Trump’s Building Binge Might Hit Speed Bump in Ryan’s Tax Plan 3-24-17
The Hill: Border Adjustment Tax Is Tax Reform On The Backs Of Working Families, It Must Be Rejected 3-24-17
mySanAntonio: Taylor: Border adjustment tax worse for SA than reopening NAFTA 3-24-17
Michigan Live: Michigan retailers come out against border adjustment tax 3-23-17
The Hill: Vulnerable Senate Dem: Border tax concerning for agriculture 3-23-17
San Antonio Business Journal: Trump's trade talk making foreign companies reluctant to expand in San Antonio 3-23-17
CNBC: Congress’ Border Adjustment Tax: PVH Chairman & CEO: I Don’t Know Why Manufacturing Job Value Is More Than Retail 3-22-17
Upstate Business Journal: A new border tax would dampen Hispanic-owned business growth 3-22-17
AccountingWeb: House GOP Makes the Case for Border-Adjustment Tax 3-22-17
The Hill: Florist tells House panel that border tax would be a 'deal killer' 3-22-17
CNBC: Retail CEO warns his tax rate could skyrocket to 85 percent under border adjustment tax 3-21-17
UBMedia: Border Tax Adjustment 3-21-17
Politico Pro: USTR Nominee: U.S. Goods Could Be Hit With Duties Abroad Under Republican Tax Plan 3-21-17
Washington Post: How a GOP tax plan would help Caterpillar after a raid by federal agents 3-21-17
The Boston Globe: Trump’s damaging border tax 3-20-17
Metal Miner: Is Border Adjustment Another Term for VAT? To Tax or Not to Tax… and Where? 3-20-17
Bloomberg BNA: Inditex Sets Global Retailer Trend in Brushing Off U.S. Border Tax 3-20-17
Washington Examiner: Author of key Ryan tax reform plank is Berkeley professor who advised Kerry 3-19-17
Washington Examiner: Pro-border adjusted tax group begins airing ads backing reform 3-19-17
Barron’s: Why the Border Adjustment Tax Should Be Killed 3-18-17
Chicago Tribune: An import tax could raise car prices by thousands 3-13-17
Thursday, March 23, 2017
Rep. Tom Rice (R-SC7) Wants the BAT Which Will Harm His District
Tom Rice of South Carolina's Seventh District is a team player. He toed the party line for Ways and Means Chairman Kevin Brady (at least on tax reform). In the March 7th #TaxReformTuesday, Rice extolled the party line:
As previously noted, Ways and Means members have reportedly been threatened with losing their seats on this critical committee if they don't pledge to support the terrible BAT. Rice is a conservative who has supported trade initiatives in the past: “South Carolina is experiencing a resurgence in manufacturing,” Rice continued. “Our manufacturers need access to the 96 percent of the world’s consumers that live outside of the United States. Without trade agreements, our manufacturers face substantial barriers selling to consumers in other countries.”
That's rich coming from Rice.
As Rice well knows, the Border Adjustment Tax will toast some of the most important employers in his district. He has supported many of these manufacturers in the past. Those manufacturers do a lot of importing. The biggest importer in the Seventh District of South Carolina is Honda. Here is a quote provided by Rice himself:
"'As our Timmonsville-based facility is the sole global production source for Honda all-terrain (ATV) and side-by-side (SxS) vehicles, Honda of South Carolina Mfg., Inc. understands the benefits of rules-based trade and open investment for increasing market-opening opportunities for our U.S.-origin products,' said Brian Newman, President of Honda of South Carolina Mfg., Inc. 'Therefore, we call upon Congress to pass TPA-2015 in order to strengthen the trade deals that the U.S. negotiates to better benefit American workers, American communities, and companies that manufacture in, and export from, the United States.' and companies that manufacture in, and export from, the United States."
Other large importers in Rice's district include Otis Elevator. Here is Rice appearing at the Otis plant:
Chummy. I bet they're glad he's their Congressman. Here is Otis bragging about the honor of hosting Rice:
Otis was induced to build in his district, like Honda, and now they're screwed . . . by their own representative. Their employees should take revenge at the polls. Other large importers in Rice's district are in auto parts, containers, packaging, molding, plumbing, boat manufacturing, clothing distribution and wire. A nice spectrum of the economy, all about to get a whopping tax bill at the behest of their Congressman.
Please note that many of these companies sought to manufacture here as a way to gain entry to the U.S. market. Like many manufacturers, they import certain components, as one does in a global supply chain, as part of manufacturing finished goods which are often destined for the U.S. market. In other words, no export tax relief for such a company.
Should Tom Rice care about these constituents? Well, he could lose his seat on Ways and Means if he did. Probably better for him to look after Number One.
As in prior importer profiles, my importer data comes from a public database and represents a two-year period (2015/16). In Rice's district, there were 619 importers with a total of 16,555 entries in that period of time. The top 76 of the importers, listed in alpha order below, accounted for 14,864 such entries. That's 29 per day for two years solid, 7,400 per year for only 76 companies. Those companies employ many thousands of South Carolinians. At least, they do at the moment. In a small district (668,000 people), these are consequential numbers.
Tom Rice's planned BAT victims:
As previously noted, Ways and Means members have reportedly been threatened with losing their seats on this critical committee if they don't pledge to support the terrible BAT. Rice is a conservative who has supported trade initiatives in the past: “South Carolina is experiencing a resurgence in manufacturing,” Rice continued. “Our manufacturers need access to the 96 percent of the world’s consumers that live outside of the United States. Without trade agreements, our manufacturers face substantial barriers selling to consumers in other countries.”
That's rich coming from Rice.
As Rice well knows, the Border Adjustment Tax will toast some of the most important employers in his district. He has supported many of these manufacturers in the past. Those manufacturers do a lot of importing. The biggest importer in the Seventh District of South Carolina is Honda. Here is a quote provided by Rice himself:
"'As our Timmonsville-based facility is the sole global production source for Honda all-terrain (ATV) and side-by-side (SxS) vehicles, Honda of South Carolina Mfg., Inc. understands the benefits of rules-based trade and open investment for increasing market-opening opportunities for our U.S.-origin products,' said Brian Newman, President of Honda of South Carolina Mfg., Inc. 'Therefore, we call upon Congress to pass TPA-2015 in order to strengthen the trade deals that the U.S. negotiates to better benefit American workers, American communities, and companies that manufacture in, and export from, the United States.' and companies that manufacture in, and export from, the United States."
Other large importers in Rice's district include Otis Elevator. Here is Rice appearing at the Otis plant:
Chummy. I bet they're glad he's their Congressman. Here is Otis bragging about the honor of hosting Rice:
Our Florence, SC team proudly hosted @RepTomRice for a facility tour & discussion about our work in the region pic.twitter.com/o8AP8cpx7O— Otis Elevator Co. (@OtisElevatorCo) August 11, 2015
Otis was induced to build in his district, like Honda, and now they're screwed . . . by their own representative. Their employees should take revenge at the polls. Other large importers in Rice's district are in auto parts, containers, packaging, molding, plumbing, boat manufacturing, clothing distribution and wire. A nice spectrum of the economy, all about to get a whopping tax bill at the behest of their Congressman.
Please note that many of these companies sought to manufacture here as a way to gain entry to the U.S. market. Like many manufacturers, they import certain components, as one does in a global supply chain, as part of manufacturing finished goods which are often destined for the U.S. market. In other words, no export tax relief for such a company.
Should Tom Rice care about these constituents? Well, he could lose his seat on Ways and Means if he did. Probably better for him to look after Number One.
As in prior importer profiles, my importer data comes from a public database and represents a two-year period (2015/16). In Rice's district, there were 619 importers with a total of 16,555 entries in that period of time. The top 76 of the importers, listed in alpha order below, accounted for 14,864 such entries. That's 29 per day for two years solid, 7,400 per year for only 76 companies. Those companies employ many thousands of South Carolinians. At least, they do at the moment. In a small district (668,000 people), these are consequential numbers.
Tom Rice's planned BAT victims:
| 3V INCORPORATED | GEORGETOWN | SC |
| 3V SIGMA | GEORGETOWN | SC |
| 3V SIGMA USA INC | GEORGETOWN | SC |
| AGRU AMERICA INC | GEORGETOWN | SC |
| ATLAS IMPORTERS INC | MARION | SC |
| AVM INDUSTRIES | MARION | SC |
| BENETEAU USA INC | MARION | SC |
| BETHUNE NONWOVENS INC | BETHUNE | SC |
| CAROLINA PRODUCT SOLUTIONS | FLORENCE | SC |
| CONBRACO INDUSTRIES INC | PAGELAND | SC |
| DAVID C POOLE INC | JOHNSONVILLE | SC |
| DAVINE INT L INC | MYRTLE BEACH | SC |
| DEVON OFFICE FURNITURE | CHESTERFIELD | SC |
| DUNAWAY YARNS INC | FLORENCE | SC |
| E.I.DU PONT DE NEMOURS AND COMPANY | MC BEE | SC |
| EI DUPONT DE NEMOURS & CO | MC BEE | SC |
| ESAB WELDING AND CUTTING PRODUCTS | FLORENCE | SC |
| GENERAL ELECTRIC HEALTHCARE | FLORENCE | SC |
| GILDAN HMR HAMER SC DC 09 | HAMER | SC |
| GILDAN USA SOUTH CAROLINA DISTR CENTER | HAMER | SC |
| GLENDINNING | CONWAY | SC |
| GLENDINNING MARINE PRODUCTS INC | CONWAY | SC |
| GREENE LE COPR | PAWLEYS ISLAND | SC |
| HELIOS GRANITE | MYRTLE BEACH | SC |
| HILEX POLY CO LLC | HARTSVILLE | SC |
| HONDA TRADING AMERICA CORP | TIMMONSVILLE | SC |
| INTERNATIONAL ASSOCIATES | HARTSVILLE | SC |
| INTERNATIONAL KNIFE AND SAW | FLORENCE | SC |
| JAYS AIR FASTENERS INC | LITTLE RIVER | SC |
| JBE INCORPERATED | HARTSVILLE | SC |
| JERRY HUBER ASSOCIATES INC | PAWLEYS ISLAND | SC |
| JOHNSON CONTROLS BATTERY GROUP | FLORENCE | SC |
| KLAUSNER TRADING USA INC | MYRTLE BEACH | SC |
| MAGNET PLANT GEMS MAGNET PLANT | FLORENCE | SC |
| MANN HUMMEL FILTRATION TECHNOLOGY | DILLON | SC |
| MAR MAC WIRE INC | MC BEE | SC |
| MARLEY ENGINEERED PRODUCTS | BENNETTSVILLE | SC |
| MARMAC PROTECTIVE APPAREL COMP | TIMMONSVILLE | SC |
| MC JAKE LLC 426 | MURRELLS INLET | SC |
| METGLAS INC | CONWAY | SC |
| MID ATLANTIC STONE | MYRTLE BEACH | SC |
| MITCO MANUFACTURING | ANDREWS | SC |
| MOREE IND IVERSIDE PUMP | CHERAW | SC |
| MULTITECH INDUSTRIES INC | MULLINS | SC |
| NAN YA PLASTIC CORPORATION | LAKE CITY | SC |
| OTIS ELEVATOR NA MFG | FLORENCE | SC |
| PACKAGING SOLUTION INC | JOHNSONVILLE | SC |
| PHI HOLDING COMPANY LLC | GEORGETOWN | SC |
| PLASTICS PROVIDER INC | CONWAY | SC |
| QVC INC | FLORENCE | SC |
| RBC BEARINGS | HARTSVILLE | SC |
| REGAL CUTTING TOOLS INC | LORIS | SC |
| ROCHE CAROLINA INC | FLORENCE | SC |
| SAE | CONWAY | SC |
| SCHACHE07LOGIN NEHMEN | CHERAW | SC |
| SCHAEFFLER GROUP USA INC | CHERAW | SC |
| SCREEN TIGHT | GEORGETOWN | SC |
| SIRUTHERSDUNN | TIMMONSVILLE | SC |
| SONOCO PRODUCTS COMPANY INC | HARTSVILLE | SC |
| SOPAKCO PACKAGING DISTRIBUTION | BENNETTSVILLE | SC |
| SOUMINEN NONWOVENS | BETHUNE | SC |
| SOUTH STAR GRANITE | MYRTLE BEACH | SC |
| STANLEY TOOLS CHERAW | CHERAW | SC |
| STRAND IMPORT AND DISTRIBUTORS INC | MYRTLE BEACH | SC |
| SURE TRAC INC | LORIS | SC |
| TEXTILE FIBER INTERNATIONAL | LAKE CITY | SC |
| TUPPERWARE US INC | HEMINGWAY | SC |
| US BLADES | FLORENCE | SC |
| VESUVIUS USA | DILLON | SC |
| WELLMAN PLASTICS RECYCLING LLC | JOHNSONVILLE | SC |
| WHISPERING PINES SPORTSWEAR INC | PAGELAND | SC |
| WHOLESALE BOUTIQUE LLC | MURRELLS INLET | SC |
| WINLAR MANAGEMENT | BENNETTSVILLE | SC |
| WOLVERINE BRASS INC | CONWAY | SC |
| WORTHINGTON IND ENGINEERED CABS | FLORENCE | SC |
New York Times Highlights Advertising War over Border Adjustment Tax
Today's New York Times puts a spotlight on the energetic effort to persuade 435 Americans to stay away from the Border Adjustment Tax, and secondarily, persuade you the public. The article shows one pro-BAT commercial that continues to propagate the urban myth that jobs are leaving the country because of taxes. The article, however, also highlights three anti-BAT commercials, two of which you may have already seen. Here's the Internet-only one:
I think it's so interesting how issues like the BAT are further eroding the Republican brand and splitting the base. Forcing the business community to break into opposing camps and fight each other isn't helping Republicans get their work done. The Republicans did this to themselves, and find themselves on a sinking ship of their own construction.
You need only look at the challenge of repealing and replacing Obamacare for the lesson of Republican lack of vision. Paul Ryan pulled the plug on a vote for today, and is talking about a vote tomorrow. We'll see if he pulls a rabbit out of the hat (don't hold your breath). Big confidence builder. The failure to move the TrumpCare bill is more than a failure to keep a promise. It is also a huge failure of Trump as "dealmaker" and Ryan as party and House leader. It does not bode well for them crafting majorities for legislation to follow. Good for us. Gridlock looks better and better.
Please understand that this reflects a choice made by the Republicans. their deal with the devil. They basically burned their bridges behind them, and decided to govern without making any effort, ANY effort, to gain Democratic support for anything. Perhaps Trump's strategy of calling Chuck Schumer "head clown" wasn't so smart. So the Republicans must now go it alone, and that has consequences. If you can't hold your team together, you get nothing done.
And they seem to have a dysfunctional coalition in the House. Trump and Ryan have yet to find a way to unify conservative and moderate Republicans even on Obamacare, their key issue. For every conservative vote they gain, they lose a moderate. With a President sinking in popularity (such as it is for someone with approval ratings under 40% after just two months on the job) and uninspiring leadership in the House, House Republicans have little incentive to line up behind . . . anyone. And the Democrats are further encouraged to become extreme and ultra-uncooperative. See the promise to filibuster Neil Gorsuch as Supreme Court nominee.
For those of us at risk of extinction under the Brady Plan, nothing could be more delightful than Republican disarray. As I have explained before, tax reform must come after healthcare reform because the Republicans must now take all action by reconciliation. Given the sharp political risks to Republicans who line up behind Trump or Ryan, tax reform hangs in the balance. We will continue to stoke the fire until it's too hot to handle.
We will do what we must to stay alive.
I think it's so interesting how issues like the BAT are further eroding the Republican brand and splitting the base. Forcing the business community to break into opposing camps and fight each other isn't helping Republicans get their work done. The Republicans did this to themselves, and find themselves on a sinking ship of their own construction.
You need only look at the challenge of repealing and replacing Obamacare for the lesson of Republican lack of vision. Paul Ryan pulled the plug on a vote for today, and is talking about a vote tomorrow. We'll see if he pulls a rabbit out of the hat (don't hold your breath). Big confidence builder. The failure to move the TrumpCare bill is more than a failure to keep a promise. It is also a huge failure of Trump as "dealmaker" and Ryan as party and House leader. It does not bode well for them crafting majorities for legislation to follow. Good for us. Gridlock looks better and better.
Please understand that this reflects a choice made by the Republicans. their deal with the devil. They basically burned their bridges behind them, and decided to govern without making any effort, ANY effort, to gain Democratic support for anything. Perhaps Trump's strategy of calling Chuck Schumer "head clown" wasn't so smart. So the Republicans must now go it alone, and that has consequences. If you can't hold your team together, you get nothing done.
And they seem to have a dysfunctional coalition in the House. Trump and Ryan have yet to find a way to unify conservative and moderate Republicans even on Obamacare, their key issue. For every conservative vote they gain, they lose a moderate. With a President sinking in popularity (such as it is for someone with approval ratings under 40% after just two months on the job) and uninspiring leadership in the House, House Republicans have little incentive to line up behind . . . anyone. And the Democrats are further encouraged to become extreme and ultra-uncooperative. See the promise to filibuster Neil Gorsuch as Supreme Court nominee.
For those of us at risk of extinction under the Brady Plan, nothing could be more delightful than Republican disarray. As I have explained before, tax reform must come after healthcare reform because the Republicans must now take all action by reconciliation. Given the sharp political risks to Republicans who line up behind Trump or Ryan, tax reform hangs in the balance. We will continue to stoke the fire until it's too hot to handle.
We will do what we must to stay alive.
Tuesday, March 21, 2017
A History Lesson on Protectionism
The Border Adjustment Tax purports to be "simply" tax policy and certainly not "trade policy". However, it is readily apparent that the BAT is trade policy, and is protectionist in nature. What me worry?
NPR's Planet Money published a short cautionary tale about protectionism which is worth a moment to read. In this report, they noted that Argentina went through a populist revolution about ten years ago and elected a charismatic president who wanted manufacturing to return home. No, they didn't elect Trump, they elected Cristina Kirchner. You know, the one who was later indicted for corruption.
NPR starts by setting the scene:
"Ten years ago, Argentina was in a situation that may sound a bit familiar. The country had just elected a populist president, Cristina Kirchner, with big plans for their economy. Kirchner wanted to control imports and exports and bring manufacturing to Argentina, so she placed huge tariffs on items made overseas. For some products, she said, if you want to sell this in Argentina, you'll have to make it in Argentina. One of those items was the cell phone."
Sound familiar?
They go on: "Cristina Kirchner's made-in-Argentina rule drove some companies away. Apple stopped selling iPhones in Argentina, but other companies played ball, including the company that made Blackberry phones."
The story doesn't end well.
Did you need me to tell you that?
Read the report and think about a U.S. economy with a border adjustment corporate tax.
And get the antacid ready.
NPR's Planet Money published a short cautionary tale about protectionism which is worth a moment to read. In this report, they noted that Argentina went through a populist revolution about ten years ago and elected a charismatic president who wanted manufacturing to return home. No, they didn't elect Trump, they elected Cristina Kirchner. You know, the one who was later indicted for corruption.
NPR starts by setting the scene:
"Ten years ago, Argentina was in a situation that may sound a bit familiar. The country had just elected a populist president, Cristina Kirchner, with big plans for their economy. Kirchner wanted to control imports and exports and bring manufacturing to Argentina, so she placed huge tariffs on items made overseas. For some products, she said, if you want to sell this in Argentina, you'll have to make it in Argentina. One of those items was the cell phone."
Sound familiar?
They go on: "Cristina Kirchner's made-in-Argentina rule drove some companies away. Apple stopped selling iPhones in Argentina, but other companies played ball, including the company that made Blackberry phones."
The story doesn't end well.
Did you need me to tell you that?
Read the report and think about a U.S. economy with a border adjustment corporate tax.
And get the antacid ready.
As the World Turns . . . TrumpCare Turns Into Border Adjustment Tax?
Will Trump and Ryan jam the new TrumpCare healthcare reform through the House? The bill leaves a lot to be desired but because the Republicans deem it impossible to gain even ONE vote from Democrats, the healthcare law is critical to everything, literally everything, they want to do. Without the savings from the repeal of Obamacare, ultimately, they cannot proceed on tax reform.
So, even if the law leaves a lot to be desired, regardless of your political stripe, the Republicans know that without it, they are stalled and stuck in the mud. This creates tremendous pressure to vote "yes" and hold your nose.
Of course, regardless of "inevitability", that does not save the Republicans. The healthcare bill disenfranchises 24 million Americans from health insurance, notably many older and lower income people, and provided a big tax windfall for higher income people. Not very good optics. And the bill is woefully incomplete and makes a poor case for better economics. There is a reason for this. The healthcare bill must fit within the constraints of a reconciliation vote. Thus, many market-friendly and patient-friendly terms cannot be included in the bill without risking a Senate filibuster. That is, if no Democratic votes can be obtained. So this is all they can get right now.
So the delicious dilemma of the rank-and-file Republicans is which vote is more likely to be survivable - "yes" or "no"? "Yes" means they are voting to take health insurance away from millions. "No" means they have failed to repeal Obamacare after eight years of complaints and promises. Perhaps more importantly, IMHO, "no" means that the specious campaign promises of lower costs and better coverage could not be achieved.
And then there's the risk of appearing too cozy with Trump. His disapproval ratings right now are epic and historic. The path to greater political unity and popularity seems uncertain, to put it charitably. He's one tweet away from no credibility at all. Supporting him could be very toxic at the midterm polls. Will Trump's base come out in the midterms and exact revenge on folks that oppose him? This is the question that Republicans must ask themselves as they figure out which line to cross. Normally, midterms do not favor the party in power.
Without healthcare reform passed into law, tax reform is likely dead for now. If that happens, the Republicans will have squandered an opportunity that may never reappear. The pressure will be enormous to vote yes to preserve the larger gains.
All of this makes the next few days are critical to the BAT war. If the healthcare bill crashes in the House, the BAT probability goes down, and Ryan's standing also declines. If healthcare gets out of the House, then Ryan's (and Brady's) star rises and BAT continues to breathe. The political logic that may propel a bad healthcare law forward could possibly work the same magic on the BAT. I think the two are different issues, and the political environment will likely degrade long before any tax legislation moves forward in the House. Each of these votes is a campaign-in-a-can, and I am sure the Democrats are rubbing their hands in glee.
Kevin Brady is continuing to bang the drum for his Border Adjustment Tax. After all, he sold his soul to get his job at Ways nad Means, and the price was the BAT. He intoned on CNBC today: "My sense is that border adjustability has become a given. That it will be part of the final tax reform plan and now the discussions are how can it be designed in transition in a very positive way for importers," Brady and Ryan continue to own the airwaves and as such, remain a very potent force on this subject, notwithstanding the poor policy they advocate. They are determined to so a Smoot-Hawley on us.
Watch the news closely in the next few days. The progress of healthcare may tell the tale of the BAT, or at least give hints at the ability of Ryan and Brady to pull it through a vote.
So, even if the law leaves a lot to be desired, regardless of your political stripe, the Republicans know that without it, they are stalled and stuck in the mud. This creates tremendous pressure to vote "yes" and hold your nose.
Of course, regardless of "inevitability", that does not save the Republicans. The healthcare bill disenfranchises 24 million Americans from health insurance, notably many older and lower income people, and provided a big tax windfall for higher income people. Not very good optics. And the bill is woefully incomplete and makes a poor case for better economics. There is a reason for this. The healthcare bill must fit within the constraints of a reconciliation vote. Thus, many market-friendly and patient-friendly terms cannot be included in the bill without risking a Senate filibuster. That is, if no Democratic votes can be obtained. So this is all they can get right now.
So the delicious dilemma of the rank-and-file Republicans is which vote is more likely to be survivable - "yes" or "no"? "Yes" means they are voting to take health insurance away from millions. "No" means they have failed to repeal Obamacare after eight years of complaints and promises. Perhaps more importantly, IMHO, "no" means that the specious campaign promises of lower costs and better coverage could not be achieved.
And then there's the risk of appearing too cozy with Trump. His disapproval ratings right now are epic and historic. The path to greater political unity and popularity seems uncertain, to put it charitably. He's one tweet away from no credibility at all. Supporting him could be very toxic at the midterm polls. Will Trump's base come out in the midterms and exact revenge on folks that oppose him? This is the question that Republicans must ask themselves as they figure out which line to cross. Normally, midterms do not favor the party in power.
Without healthcare reform passed into law, tax reform is likely dead for now. If that happens, the Republicans will have squandered an opportunity that may never reappear. The pressure will be enormous to vote yes to preserve the larger gains.
All of this makes the next few days are critical to the BAT war. If the healthcare bill crashes in the House, the BAT probability goes down, and Ryan's standing also declines. If healthcare gets out of the House, then Ryan's (and Brady's) star rises and BAT continues to breathe. The political logic that may propel a bad healthcare law forward could possibly work the same magic on the BAT. I think the two are different issues, and the political environment will likely degrade long before any tax legislation moves forward in the House. Each of these votes is a campaign-in-a-can, and I am sure the Democrats are rubbing their hands in glee.
Kevin Brady is continuing to bang the drum for his Border Adjustment Tax. After all, he sold his soul to get his job at Ways nad Means, and the price was the BAT. He intoned on CNBC today: "My sense is that border adjustability has become a given. That it will be part of the final tax reform plan and now the discussions are how can it be designed in transition in a very positive way for importers," Brady and Ryan continue to own the airwaves and as such, remain a very potent force on this subject, notwithstanding the poor policy they advocate. They are determined to so a Smoot-Hawley on us.
Watch the news closely in the next few days. The progress of healthcare may tell the tale of the BAT, or at least give hints at the ability of Ryan and Brady to pull it through a vote.
Sunday, March 19, 2017
Border Adjustment Tax News Clips (3-19-17)
More clips! As in the past, you may find some clips require a subscription and that you may be able to get in to some articles via Google searches under the article title.
Barron’s: Kill
the Border Tax Before It Kills Us 3-20-17
AEI: Adjusting
to the border adjustment tax 3-16-17
USA Today: Border
adjustment tax is a gamble: Sen. Tom
Cotton 3-16-17
The Hill: Tax
reform will be fight against special interests 3-16-17
The Spectrum: Bordering
on bad 3-16-17
Variety: What
Does GOP’s Proposed ‘Border Adjustment Tax’ Mean for Filming Abroad? 3-16-17 [Movie
Industry had a $17.8 billion trade surplus in 2015. Ca-ching!!]
World Trade
Online: Hatch: Border adjustable tax unlikely to make it
into final tax reform package
3-16-17
Manufacturing: Aerospace Industry
Calls On Congress To Pass Tax Plan
— Including Border Adjustment 3-16-17
Global Tax News: Canada's Trudeau
Concerned About US Border Adjustment
Tax Plan 3-15-17
Fox News: Boeing vs.
Wal-Mart: Aerospace giant, retail titan divided over House tax reform plan 3-15-17
The Hill: Border adjustment is the glue that keeps tax reform together 3-15-17
NPR
Marketplace: Is
a border adjustment tax illegal? 3-15-17
The
Fiscal Times: Texas Has a Lot to
Lose From a Border Tax 3-15-1-7
Washington
Examiner: Pass
tax reform to empower American businesses and workers 3-15-17
C-SPAN3: Congress’ Border Adjustment Tax:
Federal Reserve Chair: “Complicated” & “Uncertain” 3-15-17
The Daily Caller: Border Adjustment
Tax: A Big-Government Accomplice 3-15-17
The Oregon
Prosperity Project: Economic Implications
of a U.S. Border Adjustment Tax 3-15-17
Indiana- WIBC: Retailers Mobilize
to Block GOP's Proposed Import Tax 3-15-17
CNBC: Look
out for a more aggressive Fed this year
3-14-17
Benzinga: Border
Adjustment Tariff Has Trudeau, Ryan At Odds 3-14-17
OilPrice.com: The U.S. Border Tax Would Hit Texas Hard 3-14-17
Seattle Times: Boeing, aerospace industry back Republican tax plan with stiff new
charge on imports
3-14-17
The Hill:
Aerospace, semiconductor groups back House
GOP tax plan 3-14-17
The Hill: Say goodbye to affordable clothing if border
tax is passed 3-14-17
Farm Forum: Border Adjustment Tax is poor policy
3-14-17
Bloomberg:
BAT
losers will be companies that "avoid paying U.S. taxes" by shifting
profits overseas 3-14-17
The Hill: Insurance debate
could doom border adjustment tax 3-13-17
Palisades Hudson: Adjusting
Taxes Away From The Border 3-13-17
Columbus Dispath: Border
tax will raise prices on daily purchases 3-13-17
Deseret News:
Border tax will
harm Utah small businesses and consumers 3-12-17
The National
Interest: The Folly of Paul Ryan's Border-Adjustment Tax 3-12-17
The Hill: Senate Republicans eyeing alternative tax
reform plan 3-12-17
Indianapolis Business Journal: Bury the idea
of a border adjustment tax 3-11-17
NY Times: Profitable
Companies, No Taxes: Here’s How They Did It
3-9-17
Bloomberg BNA: Senators Seek Border Tax Options After
Faulting House Plan 3-2-17
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