Although the border adjustment tax (BAT) wasn't included in the most recent Republican tax plan, Arthur Laffer puts another nail in its coffin. See Arthur Laffer: Trump's tax plan should follow the Reagan model:
Let me be clear about why a BAT is even being considered: The only reason that Republicans are willing to endure this risky scheme is because they are being held hostage to the faulty logic that their tax cuts must be revenue-neutral in a static analysis. This demand that tax cuts be "paid for" will act as a brake on economic growth and force us down rabbit holes like the BAT proposal. These silly "pay for" rules aren't actual laws, but politicians view them as necessary for responsible fiscal policymaking.
But, the truth is that this economy needs growth. Marginal income tax rate cuts bring growth, not new protectionist taxes that subsidize exporters at the expense of anyone who imports goods. Let me tell you that if our nation's historic major tax reforms of the 1920s, 1960s and 1980s had required marginal rate cuts to be "paid for," we never would have had the Roaring Twenties, Go-Go Sixties or the Reagan Eighties.
So the deficit doesn't matter? Actually, the proven theory is that lower taxes bring in more revenue. More:
Politicians should focus their attention on reducing tax rates sharply, while eliminating the loopholes and deductions that create inefficiencies in the economy and reward special interests at the expense of a more rational, growth-oriented tax code. If Republicans are courageous and willing to cut tax rates dramatically while wringing the complexity out of the code, the economy will take off and generate more tax revenue that will put the country in a stronger position to deal with the long-term consequences of entitlement spending and debt. But their first priority must be growth, and the BAT is counterproductive to that national imperative.
Laffer is a very smart fellow -- he's been more right than wrong -- and well worth listening to.
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10:18 AM 5/2/2017
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