The presumably Democratic economist, Laurence J. Kotlikoff, has a
new look at the Fair Tax.  I fully plagiarized the op-ed title he
used for my blog entry - "Why Democrats should love the Fair Tax."  Don’t tell Hillary Clinton. 

The
Fair Tax is one of several ways to do a border adjustable tax that
would be quite good to level the playing field in trade.  The
Coalition for a Prosperous America has identified the VAT-tariff
issue as a predominant problem in trade.  Most of the debate on
the tax focuses upon domestic tax policy issues, which does not
necessarily drive the CPA position.

The full op-ed is reproduced
below the fold (hit "read more").  Yes, yes Mr. Boston Globe
lawyer, this full reproduction may be a copyright violation over and
above "fair use", but if you want me to take it down, send me an email.

*****

The Coalition for a Prosperous America is holding the first Issues Forum in a series, targeting the Consumption Tax. CPA’s core reasons for pushing consideration of this type of tax are laid out in this policy.   The Huckabee campaign has pushed a consumption tax called a Fair Tax.  That…

Huckabee’s "Fair Tax" gets more press in CNN’s Money magazine website.  Winning Iowa makes issue prominence dynamics change.  The articles are pretty balanced, while listing legitimate criticisms that must be worked out.  I don’t even have a problem with reporters calling the Fair Tax a radical change.  The income tax…

A Barrons editorial presents the VAT issue as well as anyone.  It gets right at the VAT tariff vs. trade issue.

I’m going to break the law by reprinting the full copyrighted piece here. 

Memo
to Barrons’ lawyers - If you don’t like it, let me know and I’ll take
the whole piece down.  But I’ll provide the link to send a few
more potential subscribers your way.

My only comment is that the
Barrons piece is written for Republicans, which is fine.  But the
message needs to come through to Democrats, because this should not be
a partisan issue.  Barrons decries corporate taxes, and many
Democrats like those taxes.  There is a good reason to shift away
from corporate and other income taxes, but the language must appeal to
those who justifiably think Big Corporations have too much power.

I will feature the key Barrons point here, and then reprint the whole thing:

Self-Punishment

Taxes on world trade are levied according to a set of rules that
penalize the United States for its reliance on corporate income taxes.
Under the rules of the World Trade Organization, value-added taxes need
not be levied if the taxed goods or services are exported. No such
export rebate is allowed for corporate income taxes. If a German car
might be liable for $5,000 of value-added tax, its manufacturer would
receive the $5,000 back from the tax authorities after driving the car
onto a ship bound for the United States. A Honda exported from these
shores would carry its share of the manufacturer’s corporate income tax
across the ocean, with no rebate allowed.

The U.S. Congress goes on year after year holding hearings about this
inequity, and the U.S. goes on and on running up trade deficits, but
nothing is ever done to secure better tax treatment for our exports by
substituting a value-added tax for the corporate income tax, or by
negotiating equal treatment for both kinds of taxation.

****

Monday, January 7, 2008

EDITORIAL COMMENTARY 

 
 
Taxation Without Justification
Cut the corporate income tax or, better yet, abolish it
Taxes on world trade are levied according to a set of rules that
penalize the United States for its reliance on corporate income taxes.
Under the rules of the World Trade Organization, value-added taxes need
not be levied if the taxed goods or services are exported. No such
export rebate is allowed for corporate income taxes. If a German car
might be liable for $5,000 of value-added tax, its manufacturer would
receive the $5,000 back from the tax authorities after driving the car
onto a ship bound for the United States. A Honda exported from these
shores would carry its share of the manufacturer’s corporate income tax
across the ocean, with no rebate allowed. (read more)

A major part of our trade deficit is caused by taxes.  Every trade agreement is a unilateral disarmament of the U.S.  We drop our tariffs, they drop some tariffs (usually more slowly) and they continue imposing a 17% tax on our exports to them.  Read the CPA policy on value…

The VAT-tariff is one of the major math problems underlying our trade deficit.  Lawmakers are pushed to vote for the Peru FTA even though Peru will continue having the ability to tax our exports to them at 19%.  Weird.  Sad.  Wrong. It’s a big problem.  A solution is necessary, but…

Another article on the trade problems caused by the consumption tax.  From the Financial Times.  Authored by two former Bushies.   The Coalition for a Prosperous America policy on consumption taxes, aka border adjustable taxes, is here. If we could craft a way to make the consumption tax revenue neutral and…

Revere Copper is the oldest manufacturing company in the United States.  Paul Revere started it in 1801.  Its plant in New Bedford, MA closed this year.(Revere Copper has its main plant in Rome, New York, which is still open and productive). The Boston Globe featured the plant closure today.  …

American factories close or move offshore.  Jobs are lost.  The U.S. became a net food importer in 1998.  Lest we complain, the Free Trade Promoting Pharisees shout us down with dogmatic incantations: "This is good.  If American farms and firms cannot compete internationally, they must give way to a new…