Posted under Economics & Taxes
Response to:
David A. Hartman’s “Why the U.S. Needs Border Adjusted Consumption Taxation.”
Mr. Hartman of the Lone Star Foundation proposes a radical solution to the US trade imbalance: the Business Transactions Tax (BTT), a 21% border adjusted VAT that would replace the US income tax. The BTT is levied upon imports and rebated on
exports, effectively border adjusted to offset foreign VATs. Hartman explains:
It will be seen that the Business Transactions Tax (BTT) has the broadest tax base which results in the lowest marginal tax rate, 21 percent, required for “tax neutral” replacement of the current IRS tax code, retaining only the personal FICA income taxes, while the employer’s share of FICA is debited against the BT1. The BTT is a consumption tax that is rebated to all taxpayers based upon poverty level incomes; it ends double taxation of saving for investment; it can be visible; it equitably includes all sectors, embracing goods, services, government and NFP’s. Most important, it is border adjusted, as was called for by the President’s Panel on Federal Tax Reform’s Growth and Investment alternative.
Q and A
From whom would the tax be collected? Businesses and employers.
What would be taxed? Return on capital, wages and salaries, and imports.
What would be exempt from taxation? Investment, exports, and untaxable imputations.
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This is an exemplary alternative to the current system, but there are three caveats which ought to be addressed:
- Consumption taxes do not discourage consumption (nor do they encourage investment.)
- VAT tend to lead to bureaucracy, and it can be difficult to measure how much value has been added to a good.
- This is a regressive tax, which ultimately hits the working poor hardest. Like the FairTax, the BTT rebates its tax to every taxpayer, which could become problematic if the poor continually vote for higher rebates.
However, the VAT does allow the US to restore its competitiveness by offsetting foreign VATs which make US goods artificially more expensive and foreign goods artificially cheaper (see Hartman’s presentation linked at the top.) Presently the US is the only member of the OECD without a border adjusted VAT, and the OECD average is 17.7%.
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The ideal solution might be to reduce spending, especially foreign; exit the WTO; and add a tariff or border adjusted VAT exclusively to imports while maintaining the progressive income tax unless and until federal spending is reduced to historic levels.
Andrew T. on 29 Mar 2008 at 4:26 pm #
Nah. Just get rid of taxes. It’s so much simpler (spending becomes a non-issue!), and in an untaxed market the more effective providers of services naturally rise to higher levels of prominence.
In other words, that doesn’t matter if the better four-door car is made in Japan or the U.S., because it’s the one I want.
Weaver on 29 Mar 2008 at 4:45 pm #
Some view themselves as more than mere individuals. For those, there is protectionism.
The market is only free in a culture that keeps it free.
Andrew T. on 29 Mar 2008 at 8:31 pm #
“Some view themselves as more than mere individuals. For those, there is protectionism.”
No, I’m certainly a self-directed individual, as you are. I do, however, make myself an active part of my community and my family. I am literally an individual, who is a part of a conjectural family and community temporally comprised of individuals. I’m afraid that this is the only way of handling the question of “individuals” that doesn’t sound like complete bs.
Keep in mind that when I go to the store to purchase clothing or something else, one of the primary factors that effect my decision is whether or not the item was manufactured in the United States or a foreign country like China. I choose to give preference to things made in the United States; in other words, American manufacturing is one of the traits I look for in what I choose to spend money on. None of this is a contraction in terms; a free market would not necessarily be more “free” in the vulgar sense of doing whatever you want.
Andrew T. on 29 Mar 2008 at 8:35 pm #
Expounding my argument further, it is illogical to ascribe rights to communities and nations, if you simultaneously deny their application to the exclusive building blocks that form the nations: individual people.
Weaver on 29 Mar 2008 at 11:06 pm #
Government must design a system where it is more profitable to buy domestically produced goods. Those states whose member units act in its best interests enjoy a significant advantage over those whose units don’t. And as the state benefits, so too do the units.
You mentioned protectionism being akin to affirmative action in the other section: in part, yes. And it is just to put one’s own ahead of strangers, just as it is to discriminate in favor of closer particular ties.
However, the state ultimately trades in its best interests, which often means putting its own ahead of others in a manner similar to affirmative action but not necessarily always, e.g. if there is a competitive advantage gained from two states trading.
So, while affirmative action is a good analogy on one level, it is not a perfect analogy. This is a subtle but important difference to say it is affirmative action is to blur the distinction between states acting in their best interests and minorities within a harmonised global society lobbying a world government for their interests.
Communities and nations don’t have rights, only it is wrong to commit certain actions against them just as it is against individuals – the source of such wrongs being religion, tradition, law, etc. Rights of individuals don’t exist in an absolute sense either. There is no religious justification nor any international law that I recognise. However, I do recognise that it’s wrong to commit certain actions against others.
This is another subtle but extremely important difference.
Andrew T. on 29 Mar 2008 at 11:39 pm #
Screw big government. That’s my answer.
Even a Kirkian flake probably realizes that he will never reach a day when the political coup de’etat is to his own favor. He should learn to embrace the power of secession. Secession is the future of freedom.
The opposition to free trade is the true stinker of the paleoconservative playbook. Paleocons had better start admitting that they don’t know jack squat about methodological economics and that ultra-nationalist babble can not be a substitute.
Andrew T. on 29 Mar 2008 at 11:46 pm #
“However, I do recognise that it’s wrong to commit certain actions against others.”
So, therefore, you admit that people have a RIGHT not to have certain actions taken against them, such as getting mowed over with a steamroller. This has a name: natural rights.
It appears that you’re just afraid to use “natural rights” as a phrase. It’s not the flavor you prefer in your cup of tea, so to speak.
Weaver on 29 Mar 2008 at 11:51 pm #
If a king bans smoking tobacco and an old man lights up anyway, has the man violated the tobacco’s natural rights?
Andrew T. on 29 Mar 2008 at 11:53 pm #
No, tobacco has no rights. It’s an inanimate object.
Andrew T. on 29 Mar 2008 at 11:56 pm #
Your question also forgets that natural rights are assumed to transcend legal rights. In cultures where it was legally required to murder handicapped or deformed infants, the action was still entirely wrong despite the fact that it was legally binding.
Weaver on 29 Mar 2008 at 11:56 pm #
Freedom isn’t why I favor secession. I favor it for the reason Burnham did: a secession of the healthy national organism from the diseased organism. Freedom exists as does everything else: to serve the nation, which exists to serve loved ones.
Religious goals must be added to that equation to make it complete, but it’s been left out for simplicity.
It’s high time we understood each other… The sooner paleolibs and cons come to understand each other, the sooner we can unite in pursuit of common objectives.
Weaver on 30 Mar 2008 at 12:01 am #
Such an action is wrong, but it is not of my concern, nor the concern of my state. It’s only of interest to my state if a citizen is injured, though I’d argue when in Rome do as the Romans… My state would need to make an agreement with another state for the protection of its citizens, else it oughtn’t expect its customs to be respected in other lands.
I’ve linked to this before, but I think you’ll find answers here:The Wrongs of Rights.
Andrew T. on 30 Mar 2008 at 12:03 am #
“The sooner paleolibs and cons come to understand each other, the sooner we can unite in pursuit of common goals.”
And it’s worth noting that I’m really not either one. If I identified as either a paleolib or con, I’d have to be implicitly identified with (anarchism, unnecessary radicalism, and occasional over-emphasis of foreign policy in the former case, irrationalism, protectionism, and occasional eugenic zaniness in the latter case).
Weaver on 30 Mar 2008 at 12:07 am #
Well Andrewistas and other anti-managerial and anti-globalist forces need to all learn to understand each other.
Andrew T. on 30 Mar 2008 at 12:11 am #
Call me a classical liberal conservative. I fail to find even one other phrase to label myself by which I am quite as completely satisfied with. I’m not ready to let go of a beautiful word that fully applauds itself like “liberal”, nor am I ready to call myself a plain old “conservative” unless I can make people take at least a minute out of their day to understand how I’m different from Ann Coulter and William F. Buckley, Jr.
Weaver on 30 Mar 2008 at 12:13 am #
If an American homoerotic male is granted the right to fornicate public, does he maintain this right in Liberia?
Or if usury is deemed theft in Portugal, is a credit card company who issues a Portugese citizen a line of credit while outside Portugal to be punished for its crime?
When a policeman says, “you have the right to remain silent,” is this a natural right? Or rather is this a right granted by the state passed in the best interests of the state or, less ideally, as a compromise among factions.
Natural rights simply don’t exist.
Weaver on 30 Mar 2008 at 12:19 am #
Classical liberal conservative it is.
Andrew T. on 30 Mar 2008 at 12:20 am #
“If an American homoerotic male is granted the right to fornicate public, does he maintain this right in Liberia?”
You’re talking about legal rights here.
“When a policeman says, “you have the right to remain silent,†is this a natural right?”
Yes, I believe it is a natural right (you should not be forced to incriminate yourself, potentially falsely, on the basis of what you may have said), and in America it also happens to be a legal one.
“Or rather is this a right granted by the state passed in the best interests of the state or, less ideally, as a compromise among factions.”
It’s a natural right that the American system happens to legally recognize. America is big for that.
See, here seems to be a major difference between myself and you. I believe that there is a transcendent moral right-and-wrong that is knowable. You think what is moral is whatever it is you grew up with.
Weaver on 30 Mar 2008 at 12:31 am #
I expect others to view right and wrong according to how they were raised.
The danger of natural rights are 1. they expand from negative rights into positive rights and 2. they expand from nationally protected rights to internationally protected rights. We ought to be concerned about our own, at varying levels according to the case.
Based on what? This is a natural right derived from religion? This cannot be a natural right by your definition as I understand it.
Weaver on 30 Mar 2008 at 12:38 am #
I might have confused this issue by linking that article. I’m gonna take a break, and I’ll straighten this out shortly.
The article is correct, but it’s dealing with a different society.
So you’re right with: “You think what is moral is whatever it is you grew up with.” However, we live in a different type of society atm.
Andrew T. on 30 Mar 2008 at 4:15 am #
I can refute both of your major objections to natural rights:
“1. they expand from negative rights into positive rights”
This is possible under mistaken interpretations of natural rights, and not a problem with natural rights per se.
“2. they expand from nationally protected rights to internationally protected rights. We ought to be concerned about our own, at varying levels according to the case.”
Yes, natural rights apply to everyone, but no, this itself does not imply internationalism.
roho on 30 Mar 2008 at 4:55 pm #
I’m more in agreement with Patrick Buchanan on trade. If a Political Leadership agrees to be responsible to the protection of his citizens (Both rich and poor), and from threats that may be militarily, economic, or whatever that threat, he should protect……….If a trade agreement benefits 10% of his friends and citizens, vast numbers of citizens in foreign nations, but has damaged the quality of life for his remaining 90% citizenry, then he has failed to “Protect” most of his citizens……………But he now can crow on an international stage, “See me. I’m not a protectionist but a free trader!”………………………….It was not free. Somebody paid the price, and it was the largest percetage of his unhappy citizens.
Bede on 31 Mar 2008 at 6:44 pm #
Free trade is destroying our economy.
Andrew T. on 31 Mar 2008 at 7:21 pm #
Bede, no it isn’t, first and foremost because actual free trade is not now in existence.
Weaver on 01 Apr 2008 at 9:58 am #
Regarding rights,
there’s nothing wrong with a class system that applies different sets of obligations and privileges to different classes depending on what class the person is in.
Nor is there is anything wrong with a society that applies the same such to all but its order is different from another society’s
Liberals seeking to impose their vaguely religious belief of natural rights are akin to Muslims seeking to impose Sharia law.
Society exists as an organism and within each society and subsociety there exists a traditional notion of duties and privileges. Right and wrong is derived from these, as well as religion of course but Christianity does not make such an authoritative stance regarding how a society ought to be run. Slavery, monarchy, and many other systems are acceptable under Christianity.
Outsiders applying their organism’s sense of right and wrong on another organism are wrong from my view. Just as the various organs of a body function together within a system, so too do the parts of a society. Order is worth preserving, and while prudent changes are theoretically just, they’re often done without awareness of all of the repercussions to the change. Dr. Fleming is quoted as saying few survive Enlightenments, and he’s right if you look back – fundamental change is dangerous and order is delicate. As a result, chaos ensues and most everyone is worse off, as well as the heritage of the former nation partially or fully lost and a new nation rising out of its ashes to replace it, often with some of the previous components and some foreign components.
The ultimate goal of a tribe is to reproduce and to survive. The most important age segment then is its children. And the most important caste is the one that is most needed and least replaceable: usually the ruling elite as well as a few skilled professionals.
When parts of a society begin acting in their best interests rather than in the best interests of the society, they become like a cancer. The society then is not made up of organisms, it is an organism. And we are each the cells within that organism. Christianity gives us some guidance as to what is right and wrong, but it directs the structure of said organism minimally. The religion may exist within many different societies, provided those of the faith do not sin.
Your idea of rights come from the values you have been taught. They do not seem to come much from Christianity… For the Christian the ultimate goal is the saving of souls, and society would be partially directed at this, (though more thought needs to go into a society contrary to many present day fanatics who seem to believe thought is for those without faith… ) And yet you do not wish for government to encourage social morality which would help members of the society to resist temptation – you have a strong distrust of government which is an historical view, the views that come from your history and the values that have been taught you.
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Switching between what is objectively correct and particularly correct is what gave the headache earlier. It’s arguable from a different set of values that what I state as objectively correct is immoral, but that would require another set of values. Ultimately we all disagree on values, so we can never agree on what is universally correct even if we all believe there are universal values, which we of course won’t.
Universally each human generally cares about his loved ones which usually includes close kin. And universally each human generally forms an attachment to material things and places or dreams and projects. And universally humans tend to pick up some religious beliefs, some believing more strongly than others. So there are some common traits within diverse humanity that we can agree on, but there is a great deal we can disagree on as well.
Andrew T. on 01 Apr 2008 at 2:00 pm #
Weaver,
Natural rights addresses a different set of questions than does Christianity. It boils down to “respect the dignity of other people”, which I’m sure you agree with.
Weaver on 01 Apr 2008 at 4:16 pm #
I treat others well of course. The idea of natural rights just seems absurd to me though. I doubt other cultures have the same values I have, and I don’t expect them to. As an outsider I think it’s dangerous for me to attempt to meddle in what I don’t understand. Were I a god with all knowledge and power then perhaps meddling would be right, but recent history is rife with examples of America’s well intending meddling leading to harm.
The sooner Americans forget natural rights and focus back on America and the laws that ought to govern here, the better.
Andrew T. on 01 Apr 2008 at 4:30 pm #
Weaver, that’s not good enough for me. I’m not going to wallow in ignorance.
Weaver on 03 Apr 2008 at 3:42 pm #
I’m not going to wallow in anarchy…
Andrew T. on 03 Apr 2008 at 6:17 pm #
Who said anything about anarchy?
I certainly didn’t.
Weaver on 03 Apr 2008 at 8:40 pm #
Free trade is anarchy.
Weaver on 03 Apr 2008 at 9:38 pm #
Or at least it creates a vulnerability in a nation.
Order might be maintained voluntarily, but I’d prefer the government do more than you wish it to do.
And in this time of globalism especially, I wish for any type of barrier I can get, as well as the economic benefits which come from protectionism and as well the political benefits that could have been gained had America remained the only superpower: had it not built China. And the security benefits of reduced trade, the identity benefits of greater autarky, the political benefits of greater autarky, and the ability of establishing a separate culture that perhaps pays its workers more or protects its environment more than other countries…
Smaller government is not always the solution. Sometimes the solution to bad government is good government.
I’m in a hurry, hence the poor construction of this post. I’ve made all these points before though, so we’ll just have to agree to disagree.
Andrew T. on 04 Apr 2008 at 2:23 am #
Protectionism doesn’t really create more order, or more prosperity. All it really does is limit the legal scope of a market economy, which leads to a greater amount of stagnation.