The proposed border adjustment tax is so complicated that even its advocates can’t agree on how its disruptive effects on the U.S. economy will play out, and there’s nothing to love about that. The BAT is a bad idea, and it should be scrapped. And while taking it off the table will bring more red ink to the federal budget, there are better ways to stanch the bleeding than subjecting the economy to the trauma of a BAT.
Despite protestations to the contrary, the border adjustment levy is a tax hike embedded in the program of tax reductions that House Republicans put forward last June under the rubric of “A Better Way.” It’s there, presumably, to help offset the effect of the administration’s planned cuts, since the Republicans’ stated aim is to keep those cuts revenue-neutral. Barron’s fully supports the goal of not adding to deficits that, before too long, will be running above $1 trillion a year, given repeated warnings from the nonpartisan Congressional Budget Office about the risk of a financial crisis, due to exploding debt.
The attraction of a BAT is that it could generate an estimated $100 billion a year in revenue. There may be reasons to challenge that estimate, but we’ll accept it for now. There are, however, better ways to slash the fiscal deficit by $100 billion a year than the Better Way plan, and most fall under the heading of spending cuts.
President Trump has spoken about “waste, fraud, and abuse” in “every agency” of the federal government. Indeed, he promised that “we will cut so much, your head will spin.” He should therefore find plenty to love in our proposed reductions in spending. Just for starters, if all corporate welfare were cut from the budget, as much as $100 billion a year could be saved, about matching the total expected from the BAT.