Expanding US Agriculture and Eliminating Barriers to US Exports

Comments for the Record

United States House of Representatives

Committee on Ways and Means

Trade Subcommittee

Hearing on Expanding U.S. Agricultural Trade and

Eliminating Barriers to U.S. Exports

Tuesday, June 14, 2016, 10:00 AM

By Michael G. Bindner

Center for Fiscal Equity

Chairman Reichert and Ranking Member Rangel, thank you for the opportunity to submit these comments for the record to U.S. Agricultural Trade and Eliminating Barriers to U.S. Exports.  As usual, our comments are based on our four-part tax reform plan, which is as follows:

• A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.
• Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments.  Heirs would also pay taxes on distributions from estates, but not the assets themselves, with distributions from sales to a qualified ESOP continuing to be exempt.
• Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.
• A VAT-like Net Business Receipts Tax (NBRT), essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age sixty.

The main trade impact in our plan is the first point, the value added tax (VAT).  This is because agricultural products would shed the tax, i.e. the tax would be zero rated, at export.  Whatever VAT congress sets is an export subsidy.  Seen another way, to not put as much taxation into VAT as possible is to enact an unconstitutional export tax.

The second point, the income and inheritance surtax, has no impact on exports.  It is what people pay when they have successfully exported goods and their costs have been otherwise covered by the VAT and the Net Business Receipts Tax/Subtraction VAT.  This VAT will fund U.S. military deployments abroad, so it helps make exports safe but is not involved in trade policy other than in protecting the seas.

The third point is about individual retirement savings.  As long as such savings are funded through a payroll tax and linked to income, rather than funded by a consumption tax and paid as an average, they will add a small amount to the export cost of products.

The fourth bullet point is tricky.  The NBRT/Subtraction VAT could be made either border adjustable, like the VAT, or be included in the price.  This tax is designed to benefit the families of workers, either through government services or services provided by employers in lieu of tax.  As such, it is really part of compensation.  While we could run all compensation through the public sector and make it all border adjustable, that would be a mockery of the concept.  The tax is designed to pay for needed services.  Not including the tax at the border means that services provided to agricultural employees, such as a much needed expanded child tax credit – would be forgone.  To this I respond, absolutely not – Heaven forbid – over my dead body.  Just no.

Our last point has nothing to do with tax policy and everything to do with agricultural trade.  For too long, agricultural trade policy has been explicitly designed to dump our goods on poor countries at or before harvest.  Much of the world has gone hungry based on how that has crippled local agriculture.  Market penetration should be to other OECD countries.  We should never import food to nations where doing so kills local agriculture.  To consciously do so is damnable and should not be done in the name of American voters or consumers.  Ever.

Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.