Watch your wallets
Republicans are pushing a new corporate tax plan that will end up costing most of you a bundle. Here’s are 7 things you should know about the so-called “border adjustment tax.”
- The U.S. imports about $2.7 trillion worth of goods a year. Many imports are cheap because labor costs are much lower in places like Southeast Asia.
- Our current tax code taxes corporations on their profits. So when Wal-Mart buys shirts from Vietnam for (10 and sells them for) 13, Wal-Mart is only taxed on that $3 of profit.
- But under the new Republican tax plan, Wal-Mart would be taxed on the full $13. As a result of this tax, Wall Street analysts expect retail prices in the U.S. to rise as much as 15 percent.
- The plan would also cut taxes on companies that export from the United States.This might encourage companies to locate production in the United States — which could be good for American workers.
- As a practical matter, who’s going to bear most of the burden and who’s going to get most of the benefit? The burden will fall mainly on the poor and middle class because they spend almost all of their incomes, so they’ll take the biggest hit in higher retail prices.
- The benefits will go mostly to upper-income people who are shareholders of companies that export, and who’ll therefore get most of the tax cuts in the form of higher profits — and higher share prices.
- It’s possible, of course, the dollar will rise in response to higher taxes on imports, effectively wiping out the tax burden. But no one can be sure.
The tax plan is dressed up as a way to make American more competitive. But underneath it’s just a typical Republican plan that redistributes from the poor and middle class to corporations and the wealthy.