Tax Reform is a Must if America is to Move Forward
Our national debt is over $17 trillion. For many, the problems that have led to this enormous burden are a hopelessly complicated mess. But there are some very basic solutions to the obstacles we face.
The United States originally developed into a wealthy and productive nation by protecting its domestic industries and jobs. Americans bought American-made products, and foreign countries were taxed if they wanted to sell their goods here.
The U.S. is still the largest consumer nation in the world and as such, we should not be giving away the rights to do business here for free. In order to generate funds and reverse the trends that have lead to our massive trade deficit, we would do well to examine the successful trade and taxation practices of nations such as Japan, Germany and even China.
The most direct way to maximize profits through trade would be to reinstate tariffs, similar to those we have used for over two centuries. Those supporting over two decades of disastrous “free trade” policies that have ravaged our economy spread fear by talking of a looming a trade war. Yet the very trade war they fear has already begun, and the United States has been losing badly.
While the U.S. government has been sold on “free trade,” the Japanese, German and Chinese government do not follow the same strategies. For example, China gathers approximately 20% of its total revenue from a combination of import value-added taxes, import consumption taxes, tariffs, and customs duties.
By comparison, the U.S. has no import value-added tax, and derives only 1.38% of its revenue from tariffs and customs duties. Instead, we have placed the burden on U.S. companies, by having one of the highest corporate tax rates, sometimes as high as 30%.
If the U.S. had imposed a similar rate of taxation it could have gathered over $14 billion in customs revenue in the last five years alone. This is not an insignificant number given the current amount of debt the United States owes foreign nations.
These countries have set their own rules in order to keep their economies competitive, and we are being naive and playing by rules that allow our country to be taken advantage of. As much as many people would like to, we cannot control what China does with its economy. We can, however, control what we do with our own.
We have a massive trade deficit, and a massive budget deficit, and the answers aren’t going to come from asking for changes abroad or only making cuts at home.
A different style of tax – and in particular a border consumption tax that would be instituted with other significant tax reforms – could be immensely beneficial for the economy. Yet serious discussion of taxes is often avoided by our politicians. If nations like China can generate new revenue by taxing American companies to innovate and grow, there is no reason we cannot do the same.
With this additional revenue we could work towards eliminating our debt, invest in our crumbling infrastructure and invest in new technologies that could be manufactured in the U.S. However, to do this we must act now to protect our future.
Almost every other nation in the world, including virtually every one of our trading partners, practices protectionism in some way, shape or form. Meanwhile, the U.S. is not fighting to protect itself at all, and these countries are not hesitating to take advantage.
We must engage in the same protective practices that are working elsewhere, or the United States will continue to have major a disadvantage in the world market.
For more information on the state of the nation, and policies to strengthen our weakened economic condition, be sure to subscribe to receive our newsletter twice weekly.