President Trump, you don't need Tariffs - You need the FAIRtax!
If he is elected, Donald Trump says he wants to impose tariffs of at least 10% on many imported products. Mr. Trump believes that the tariffs will be beneficial to U.S. based businesses and their employees.
Opponents argue that tariffs start trade wars and increase prices on consumer items. That harms both consumers and U.S. workers. They point out that every job saved may cost consumers as much as $800,000.
Those who are arguing over tariffs are ignoring the huge elephant in the room—the income/payroll tax system. It’s an indisputable fact that the federal income/payroll tax system punishes U.S. exporters and rewards imports into the U.S.
There is a simple solution that accomplishes what both President Trump and those on the other side of the issue want. The solution does not require any new tariffs—just enact the FAIRtax. Here is why.
The Effect of Value Added Taxes
As was discussed in my report two weeks ago, our major trading partners increasingly rely on a value added tax (VAT), a consumption tax, to raise the revenues needed for their governments.
Like the FAIRtax, the value added tax is charged on products that are consumed in the country in which they are produced. However, when a foreign based manufacturer produces a product for export, the VAT amount is removed out of the price. That means that products produced for export by a French company for example, are able to be exported for sale at a price that removes the 20% in VAT taxes and can be sold for 20% less than the price the same product sells for in France and the profit remains the same.
Products imported into a country with a VAT, every country but the U.S. will have that country’s VAT added to the price when sold to consumers.
A tax that is not charged on exports is called a “border-adjustable” tax.
The U.S. Income/Payroll Tax
In the United States, income and payroll taxes are not border-adjustable taxes. The costs of the income/payroll tax system increase the prices of all U.S. made goods by between 15% to 25%.
Consequently, U.S.-made products sold on the world market can cost 15% to 25% more than comparable foreign made products because of the embedded taxes.
Many in Congress have recognized that U.S. exports are burdened with this huge price disadvantage when compared to products produced in VAT countries. In 2017, a proposal was included in the initial tax reform plan that would allow U.S. manufacturers a credit for exports, thus allowing them to sell at more competitive prices.
However, it became obvious that this proposal would not be allowed under the World Trade Organization rules, and it was not in the final bill.
The World Trade Organization (WTO)
WTO is an international organization, with 160 members. It was officially established on January 1, 1995, and is headquartered in Geneva, Switzerland. Its purpose is to regulate and facilitate international trade.
While the WTO doesn't explicitly define which taxes are considered border-adjustable, it evaluates taxes and regulations based on whether they conform to these principles. Border-adjustable taxes are generally taxes that are applied equally to both domestic and imported products, without discriminating against foreign goods. This is to ensure a level playing field for international trade and avoid protectionist measures.
WTO rules require that taxes and regulations affecting international trade should not be applied in a manner that discriminates against foreign products or provides an unfair advantage to domestic products. Here are the factors considered:
- National Treatment: Under the principle of national treatment, foreign products should be treated no less favorably than domestic products. This means that taxes should not discriminate against imported goods compared to domestically produced goods.
- Most-Favored-Nation (MFN) Treatment: The MFN principle states that any advantage or concession given to one WTO member should be extended to all other members. This ensures that discriminatory taxation practices are not allowed.
- Non-Discrimination: The principle of non-discrimination also prohibits practices that favor domestic products over imports. Taxes and regulations should be applied uniformly and impartially to all products, regardless of their origin.
- Transparency: WTO members are encouraged to provide transparent information about their tax systems, making it easier for other countries to assess whether a tax is consistent with WTO rules.
This is why WTO members, except for the U.S., use a VAT which is border-adjustable. Unlike the income/payroll tax, the amount of the VAT is clear, and all countries charge it only in the country of origin and rebate it on all of their exports.
CONCLUSION
Almost everyone agrees, if a U.S. tariff is applied to imports, our trading partners, will reciprocate with a 10% tariff on U.S. products imported into their country. This 10% tariff will be added to the selling price of the product and paid by American consumers when they purchase the product or a product containing the tariff product.
The U.S. exporter is already exporting goods whose prices are inflated by 15%-25% because of the cost of the income/payroll tax system. Now the price of his product be increased by both the VAT and an additional 10% tariff tacked on in the receiving country.
True, a country exporting to the U.S. will see the price of their product increased by the 10% tariff. However, this will simply make the product more expensive and the cost of the tariff, like any other tax, will be passed to the consumer who will pay it in the price of the item.
Contrast this dismal situation with life under the FAIRtax. U.S. products will:
- The FAIRtax is clearly a border-adjustable tax under the WTO rules.
- Be between 15%-25% cheaper because the cost of the income/payroll tax system are no longer included in their prices.
- They will be 15%-25% less expensive in the U.S. and 12%-25% less expensive when exported because the FAIRtax only applies to new retail sales and retail services in the U.S.
- Imports will be subject to the same 23% FAIRtax as domestic products. This will eliminate a huge advantage foreign producers over U.S. producers selling products in the U.S.
- This will lead to more production and jobs in the U.S.
No need for tariffs.
No need for a trade war paid for by the U.S. consumer.
The choice is easy—do we want a system for funding the federal government:
- That is so simple everyone can understand it.
- That shows the costs of the federal government on every retail receipt so all of us understand what we are paying.
- That helps U.S. companies compete with foreign competitors.
- That keeps jobs in the U.S. rather than exporting them to other countries.
- That permanently establishes the solvency of Social Security and Medicare.
- That eliminates special treatment for any group of taxpayers.
- THAT IS THE LARGEST TRANSFER OF POWER FROM D.C. TO THE PEOPLE SINCE THE CONSTITUTION WAS ADOPTED.
D.C. is ignoring the one real solution that allows us to remain citizens and not subjects, the FAIRtax. The FAIRtax is simple, non-invasive, but most of all, IT WORKS!
THE SOLUTION—PASS THE FAIRTAX!
The FAIRtax transfers power from Congress and the bureaucrats to the people. We, not D.C., decide how much federal tax we pay.
Join us and TAKE BACK CONTROL OF OUR COUNTRY AND OUR LIVES—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.
We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL,
“Nobody made a greater mistake than he who did nothing because he could do only a little.”
Please go to this link to invest in AFFT and your country. It’s an investment in your and your family’s future.