Trump's border tax could boost U.S. jobs but I have a better idea

Dickinson Law Firm Des Moines, IA Iowa Tax Law David Repp

Posted on 02/27/2017 at 12:00 AM by David Repp

On Thursday, President Trump spoke favorably about a potentially export-boosting border adjustment tax being pushed by Republicans in the U.S. Congress, but did not specifically endorse it.

Trump, who has lashed out at U.S. companies who have moved operations to countries like Mexico, has previously sent mixed signals on the proposal at the heart of a Republican plan to overhaul the tax code for the first time in more than 30 years.

"It could lead to a lot more jobs in the United States", Trump told Reuters in an interview, using his most positive language to date on the proposal.

"I certainly support a form of tax on the border," he told Reuters on Thursday. "What is going to happen is companies are going to come back here, they're going to build their factories and they're going to create a lot of jobs and there's no tax."

The problem with a border tax is that it will increase the cost of most of the products that we like to buy. Reuters news service notes that nearly all of the nation's clothing, shoes, and electronics are imported and the retail industry argues that a tax on these goods—and a wide variety of foods, automobiles, and more—would result in higher prices for consumers and decreased profits for sellers. 

This makes sense because the reason Maytag moved its appliance division from Newton, Iowa, to Mexico, was because of a low-wage workforce in Mexico. This allowed Maytag (owned by Whirlpool Corporation) to compete with the likes of Electrolux, GE, Kenmore, LG, Bosch, Samsung, Fisher & Paykel and Haier. The beneficiary of this global competition is the consumer. 

Because of such competition, Americans can now buy an assortment of vacuum cleaners for under $50. (Dirt Devil Pro $44.99; Bissell PowerForce $48.84) How much would those vacuum cleaners cost if they were assembled by American workers earning $25 an hour? Could one American worker assemble a vacuum cleaner in two hours, assuming all the parts were free?  Probably not. And even if they could, that would leave no profit margin for the manufacturer or the retailer.

I have a better idea to create jobs in the United States. President Trump wants to improve the infrastructure, such as roads and highways, in the United States. Great idea. However, most roads are built with expensive earthmoving equipment built by Caterpillar and John Deere. My solution: pass legislation that mandates roads to be built with spoons rather than bulldozers.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

Categories: Taxation Law, David Repp


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