Taxes

Even The Kochs Say House GOP Tax Plans Would Be Terrible

JM Ashby
Written by JM Ashby

While the Koch Brothers are obviously supportive of plans that reduce corporate taxes, a proposal being considered by Republicans goes too far even for them.

Republicans are considering a massive shift in the tax code that would eliminate corporate income taxes and eliminate taxes on exports, but slap a tax on imports and domestic sales.

This, according to the infamous brothers, could be "devastating."

In a statement, Koch objected to the plan’s proposal to replace the current corporate income tax with a 20 percent levy on U.S. companies’ domestic sales and on their imports of foreign goods and materials. Exports under the plan would be tax-free.

The proposal, which is generally known by the term “border adjustments,” would “adversely impact American consumers by forcing them to pay higher prices on products produced in and goods imported to the U.S. that they use every single day,” the company said in the statement.

They aren't wrong and you certainly don't need to take their word for it. You need only look around you to see that virtually everything in your home was imported. The clothes you're wearing right now and even the food we're accustomed to eating all year long depends on imports. Fresh produce sold in the winter obviously didn't come from local farms.

It's no mystery that these increased costs of doing business would be passed down to consumers at no benefit to them because it's not as if whole industries will suddenly uproot and build a manufacturing base in America. Even if they did, the overwhelming majority of the manufacturing would be automated.

It makes me just as uncomfortable as anyone, but we'll soon find ourselves in a position where the best hope for saving the American economy may be the likes of Wal-Mart and the Koch Brothers who are both lobbying against these proposed changes.

As it turns out, there is a line between their desire to pay less taxes and ideological proposals that could devastate their entire business model and possibly cause a recession.

The U.S. Chamber of Commerce threw in with Trump and GOP candidates this election cycle, but I'm not as convinced as they seem to be that they can effectively control the Trump regime.

  • muselet

    The Rs have wanted to replace the income tax with a consumption tax, like a VAT, for a very long time.

    A VAT—Value Added Tax, for the uninitiated—is common enough to be called the norm worldwide, and implemented properly can be relatively progressive, given reasonable exemptions and subsidies.

    I doubt the Rs want to build in exemptions and subsidies. (And yes, I know what’s been proposed isn’t a VAT.)

    I’m not sure I find the argument from Koch Industries compelling—there’s no way in hell KI cares about consumers’ financial wellbeing—and the WTO probably won’t allow border adjustments, but it’s interesting to see pushback from unlikely places.

    –alopecia

    • ninjaf

      They only care because it means their toilet paper and paper towel businesses, etc. will take a hit.

    • But wouldn’t a consumption tax, especially one on every day goods like food affect the poor more than the upper classes? Is that the kind of exemption you are talking about?

      • muselet

        Yes. Countries with VATs (or GSTs, Goods and Services Taxes, more or less that same thing) typically exempt certain food items and have an income tax deduction for a certain amount of VAT paid in order to make the tax more progressive.

        (VAT is sort of a consumption tax, but it’s applied at every step in the process of making a product; a sales tax is paid only by the end user of a product. I hope that clarifies this a little.)

        And yes, countries with VATs have income taxes as well. That’s what makes the Righty vision of a consumption tax in the US so distressing: the proposal is to do away with income tax and corporate taxes and only tax consumption. To my knowledge, no country has done that, in part because it almost guarantees a highly regressive tax.

        What’s been proposed by the Rs, border adjustments, isn’t a VAT, it’s a weird hybrid of a tariff and a national sales tax, so all the above is slightly off-topic. For technical reasons, the World Trade Organization is unlikely to approve border adjustments, but somehow I doubt a Trump administration or an R-majority Congress would care what the WTO says.

        (Also, please be aware I’m not an economist, so I may not be completely correct about some of this. Season to taste.)

        –alopecia

  • Badgerite

    Possibly cause a recession? Count on it. And I wonder how it will play to those rust belt people who felt left behind by corporate America when they are the ones who end up paying more and corporations will simply pay nothing. And here I thought corporations were “people” too “my friend”.

  • Dread_Pirate_Mathius

    It’s almost like Republicans are just now discovering that governing is hard.