Stop the Disastrous Import Tax

One of the proposals being circulated in Washington these days is so misguided and counter-productive that I feel compelled to write to all of you to encourage you, whether you be Republican or Democrat, to oppose this measure any way you can.

The proposal is called “The Border Tax Adjustment”. It says that U.S. corporations would no longer be allowed to deduct the cost of imported products (either finished goods or process parts) when they prepare their income tax filings. Thus, any company using imported products would report a much higher profit for tax purposes than they actually made. The proponents of this change say that they will lower the corporate profits tax rate to compensate for the artificially higher taxable income.

It is believed by the backers of this proposal that there will be a large decline in imports into the U.S. and therefore an increase in U.S. production and jobs. They also say that the value of the U.S. Dollar will increase making the remaining imported items cheaper for the American consumer.

Here’s the problem. Our exports, the products we sell abroad, will decline immediately and precipitously. Because the Dollar becomes more expensive for Europeans, Asians, Africans, and Latin Americans, they will be unable to purchase as much from us as before. Even more important, other countries will impose similar tariffs on U.S. made goods thereby depressing our exports further. This is exactly what happened after the Smoot Hawley Tariff was enacted by the U.S. in 1930. It is generally accepted that Smoot Hawley was one of the major causes of the worldwide depression of the 1930’s

Further, while there could be an increase in U.S. factory production after The Border Tax Adjustment, it would take a long time for the U.S. to reopen plants, develop and install machinery, and train new workers. Unfortunately, the decrease in exports would happen much faster. Result – a downturn in the U.S. economy as exports decrease faster than domestic production grows.

Lastly, the price of imported products would increase sizably, and many imported items may no longer be available to us here in the U.S. The American people would end up paying more for cars, cell phones, furniture, electronic devices, clothing, household appliances, food and more.



Larry Prince