Politics & Policy

The Border Tax Is a Bad Idea

Offloading cargo at the Port of Miami, 2016 (Reuters photo: Carlo Allegri)
It’s a bad deal for consumers as well as producers.

Two weeks ago, in an article that we authored for National Review, we stated that economic growth and security have to be the immediate focus of President Trump’s agenda. 

Based upon the Wall Street Journal’s reports of President-elect Trump’s negative response to Congress’s trial balloon of creating a new 20 percent national sales tax on all imports (known as the border adjustment tax), and the results of our new national poll, it seems that President-elect Trump remains far more in touch with the average American than Congress is.

In our new January 16 national poll, the top priority among all voters remains the economic-growth issues of creating jobs and cutting taxes at 45 percent, with security priorities in second at 34 percent. 

Then we tested economic arguments against the border adjustment tax, as made by Steve Forbes in his recent article

These new polling results show that the concept of a border adjustment tax on imports initially starts as a very polarizing concept that most Americans do NOT support, and then it’s downhill from there. When the voters learn additional facts about a border-adjustment tax – that it will increase costs to American consumers by a trillion dollars over the next ten years and would significantly increase unemployment to over 10 percent — a large majority of six in ten Americans would oppose the new border-adjustment tax.

It seems clear that President-elect Trump’s quotes in the January 17 Wall Street Journal opposing a border adjustment tax as “too complicated” and a “bad deal” very accurately summarize the opinions of American voters.

When we asked all voters if they would approve or disapprove of a new 20 percent border adjustment tax on all imported products, only 41 percent approved while 46 percent disapproved. It’s not good when most voters don’t support a new tax.

Do you approve or disapprove of Congress passing a new 20 percent national sales tax, often called a border adjustment tax, on products like clothes, shoes, household appliances, electronic devices, cell phones, computers, cars, trucks, gasoline, and other various materials needed for domestic manufacturing that are imported into the United States?

TOTAL APPROVE 40.7%

Strongly 17.2

Somewhat 23.6

TOTAL DISAPPROVE 45.5%

Somewhat 19.6

Strongly 25.9

DON’T KNOW 13.7%

When told that the border adjustment tax would cost consumers at least a trillion dollars over the next ten years, 61 percent disapprove of the new tax. When the voters are told that economic studies forecast that the blueprint for the border adjustment tax would result in a spike in unemployment of over 10 percent due to decreased consumption and higher costs, 57.5 percent disapprove. It’s pretty clear that higher prices and fewer jobs just don’t appeal to most voters.

Now, would you approve or disapprove of Congress passing the border adjustment tax if you knew that it would cost American consumers at least a trillion dollars over the next ten years?

TOTAL APPROVE 25.9%

Strongly 10.7

Somewhat 15.2

TOTAL DISAPPROVE 61.0%

Somewhat 19.9

Strongly 41.1

DON’T KNOW 13.0%

Now, would you approve or disapprove of Congress passing the border adjustment tax if you knew that economic experts at the University of Maryland said that if currency responses are lagged over a five-year period, the blueprint plan will result in a dramatic spike in unemployment to over 10 percent due to decreased consumption and higher costs due to the tax?

TOTAL APPROVE 24.5%

Strongly 10.7

Somewhat 13.8

TOTAL DISAPPROVE 57.5%

Somewhat 21.3

Strongly 36.1

DON’T KNOW 18.0%

Looking ahead to the midterm election, when voters were asked how a vote for the new border adjustment tax would affect their future vote for Congress, only 23 percent of voters are more likely to support that candidate, but 50 percent are less likely. For House Republicans, who maintain a 24-seat majority, the idea of losing 27 seats, as Ronald Reagan did in 1982, because the benefits of his pro-growth tax cut didn’t take effect until 1983, enacting a 20 percent border adjustment tax instead of a growth plan seems counterproductive if not suicidal.

For House Republicans, who maintain a 24-seat majority, the idea of losing 27 seats, as Ronald Reagan did in 1982, enacting a 20 percent border  adjustment tax instead of a growth plan seems counterproductive if not suicidal.

Would you be more likely or less likely to vote for a member of Congress who voted to pass a new 20 percent national sales tax, often called a border adjustment tax, on all imported goods like clothes, shoes, household appliances, electronic devices, cell phones, computers, cars, trucks, gasoline, and other various materials needed for domestic manufacturing? If knowing this makes no difference, just say so.

TOTAL MORE LIKELY 22.6%

Much 10.5

Somewhat 12.1

TOTAL LESS LIKELY 50.4%

Somewhat 20.1

Much 30.3

NO DIFFERENCE 14.4%

DON’T KNOW 12.6%

Almost half of all voters, 48 percent, say that it’s a bad idea to prohibit a business from deducting what they paid to purchase imported goods, as they do today, because the additional cost of the tax would be passed on to American consumers in higher prices. An even higher amount, 54 percent, think it’s a bad idea to allow American corporations to export the products they make totally tax-free, without even paying taxes on their profits. Once again, higher prices in stores and online for working-class consumers and a tax holiday for corporate exporters just doesn’t seem to resonate with the majority of voters.

Do you think it’s a good idea that such a new tax would prohibit a local business from deducting what they paid to purchase imported goods, as they are allowed to do today, if you knew the additional cost of the tax would be passed on to American consumers in the form of higher prices for everyday goods and services?

YES/GOOD IDEA 24.5%

NO/BAD IDEA 48.2%

UNSURE 27.4%

In contrast, do you think that it’s a good idea to allow American corporations to export the products they make totally tax free so that they would pay no taxes on their revenues and profits?

YES/GOOD IDEA 25.6%

NO/BAD IDEA 53.5%

UNSURE 20.9%

Finally, as part of the blueprint, the voters, by a 50 percent to 34 percent margin, oppose eliminating all federal income-tax deductions for state and local taxes. So while we’re raising consumer taxes, we’re also eliminating deductions for other local taxes they already paid. It’s not going to make a lot of sense to a lot of voters.

Do you approve or disapprove of eliminating all federal income-tax deductions for state and local taxes that taxpayers pay on property and income taxes?

TOTAL APPROVE 34.4%

Strongly 14.6

Somewhat 19.8

TOTAL DISAPPROVE 49.8%

Somewhat 22.3

Strongly 27.5

DON’T KNOW 15.7%

With these new results, it’s very clear that the majority of voters would support President Trump in his opposition to Congress’s proposed new 20 percent national sales tax on imports known as the border adjustment tax. The majority of American voters clearly believes that this new tax, while raising a trillion dollars in revenue for Washington, will result in higher prices for consumers and fewer American jobs. It seems even more clear that if the Republicans in Congress wish to press for this new tax, President Trump will have the perfect opportunity exercise a Bill Clinton–like triangulation maneuver from the right. He will be keeping his word and protecting the tens of millions of working-class voters who made history on November 8, 2016, by electing him as president. As President Trump said, and most Americans would agree, the border-adjustment tax is a complicated bad deal. Time for Congress to focus on a pro-growth, good deal that creates economic growth, more jobs, and higher pay. That’s America’s first priority and it appears to be President Trump’s as well.

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