Saturday, March 4, 2017

Roubini Slams Border Tax Proposal

Nouriel Roubini
Nouriel Roubini, a professor at NYU’s Stern School of Business and Chairman of Roubini Macro Associates, correctly states:
The United States may be about to implement a border adjustment tax. The Republican Party, now in control of the legislative and executive branches, views a BAT – which would effectively subsidize US exporters, by giving them tax breaks, while penalizing US companies that import goods – as an important element of corporate-tax reform. They claim that it would improve the US trade balance, while boosting domestic production, investment, and employment. They are wrong.
The truth is that the Republicans’ plan is highly problematic. Along with other proposed reforms, the BAT would turn the US corporate income tax into a tax on corporate cash flow (with border adjustment), implying far-reaching consequences for US companies’ competitiveness and profitability.
Some sectors or firms – especially those that rely heavily on imports, such as US retailers – would face sharp increases in their tax liabilities; in some cases, these increases would be even greater than their pre-tax profits. Meanwhile, sectors or firms that export, like those in manufacturing, would enjoy significant reductions in their tax burden. This divergence seems both unwarranted and unfair.

7 comments:

  1. It feels so wrong to be constantly in agreement with these jerkwads, but here we are.

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    1. Welcome to Trump's America in which in a lefty professor makes actual sense for once while so-called liberty lovers such as Infowars are now bootlicks of the state.

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    2. Roubini is a monetarist flake - his opinion is only of marginal value.

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  2. Firms that export pay less; firms that import pay more; and on balance not a tax increase. What is unlibertarian about this? I can imagine a PPS doing this.
    For genuine libertarians, this blog has become a load of rubbish.

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    1. The regulations in the USA basically force new companies to use contract manufacturers in China unless they are getting a political bank roll of subsidy or the owner(s) have political influence to get tax breaks at the very least. Ideally both. A BAT effectively blocks new competition to the existing players.

      A BAT will also wack US assembly plants hard. In order to keep final assembly in the USA a fair number of parts imported. Tax those and we may see the plant shutdown in favor of an overseas facility.

      Lastly once done, there will be both income tax and BAT. Both will increase over time. It is far easier to get two small tax increases than one bigger one.

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  3. Question: Is Professor Roubini finally getting something right? Or do I need to re-think my position?

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    1. Roubini has discovered a new type of inflationary effect which is 'temporary but persistent'. This deserves a Nobel prize.

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