The House is running into a lot of resistance on a plan to enact tariffs (aka import tax) in its tax overhaul plan. President Donald Trump didn’t include it in his tax agenda, which was announced in April, but Texas Congressman Kevin Brady kept the tariff alive in the House Ways and Means Committee. Associated Press reports the import tax is probably on life support.
[Brady] still says it’s the best way to promote economic growth and domestic jobs, but he has softened his stance on alternatives.
“I’m still confident that we’re going to stay at the table until we solve that problem, which is how do we stop U.S. jobs from continuing to leave the United States,” Brady said. “We’re going to remain open to the best ideas on how we do that.”
On Tuesday, Brady proposed gradually phasing in the tax over five years to give corporations time to adjust.
It wasn’t received well by opponents.
“Forcing consumers to pay more so that some profitable companies can operate tax-free is no better of an idea in five years than it is today,” said Brian Dodge of the Retail Industry Leaders Association.
The House Freedom Caucus is also leading resistance to the tariff, and AP reports no one in the Senate has even sponsored tariff legislation. Coastal states, specifically Alabama, have concerns on what could happen to their economies if a broad tariff plan is going to be put in place. Via AL.com (emphasis mine):
Mobile Area Chamber of Commerce President and CEO Bill Sisson opened the session by saying that the Mobile Area has a particular interest in international trade, partly because of the shipping traffic through the Alabama State Docks. “Eight of our top 10 manufacturers are internationally headquartered,” he said. “We have some 49 businesses that are internationally headquartered in this area, employing well over 13,000 people.”
“Obviously trade is extraordinarily important to our Chamber of Commerce and certainly this area, we’re dependent on it, in fact,” Sisson said, adding that Mobile was founded as a trading colony and arguably was built around its port. He said the Mobile Area Chamber has an international business department, which is relatively unusual.
According to industry reports cited by the Mobile Area Chamber of Commerce, business has boomed at the Port of Mobile in recent years, with the city topping one list of the fastest-growing North American Ports in 2016. According to industry site JOC.com, Mobile’s share of total trade moving through Gulf Coast ports jumped from 7.1 percent in 2015 to 8.2 percent in 2016. A 2015 Brookings Institute report said that the value of exports out of Mobile was $2.5 billion.
It should be pointed out Alabama isn’t exactly a bastion of free markets, specifically when it comes to corporate welfare. The state House recently passed a bill which allows Alabama to hand out at least $340M in incentives aka bribes to corporations each year. Current state law caps it at $850M total until 2019. The cynic in me thinks one reason why Alabama is doing so well in shipping is because of its willingness to hand out money to corporations so they’ll send all their product through Mobile. It’s a shoddy way to do business, and not how free markets and free trade are supposed to work. But this doesn’t mean the U.S. should throw free trade onto an ash heap, along with the free markets which come along with it, and start throwing out tariffs left and right, while also handing out welfare through things like the Ex-Im Bank. It does mean state, local, and federal governments need to enact policies which don’t hurt consumers and companies.
Tax reform is key to this idea, so it’s nice to see House Republicans attempting to do something. The problem is the tax reform isn’t going to go far enough, and any tax cuts have to include cuts in government spending and regulations. It means Congress, and the President, can’t sit there and say, “Oh, we’re going to do cuts here, but massively spend elsewhere.” The government will have to admit it spends too much, and start doing cuts on everything, including golden calves like the Department of Defense and ExIM Bank. They’ll also need to resist adding in new taxes aka tariffs to help pay for spending the government can’t afford. That will end up hurting everyone, as prices end up rising to offset the extra tax/tariff.