Trade Policy 2021

 WM: The Biden Administration’s 2021 Trade Policy Agenda, May 13, 2021

Finance: The President’s 2021 Trade Policy Agenda, May 12, 2021

The last four years have shown us an extreme example of how not to use tariffs. The prior administration used economic policy as gunboat diplomacy, but without having a navy. We trust that from now on, trade policy will be handled by professionals, leading to a return to normalcy.

This is not to say that change is not needed. Donald Trump was originally elected by voters who saw the impact that bipartisan trade policy on their lives. Trump did not help, but for them, he at least tried something. In the long run, employee ownership is the solution for worker wellbeing on both sides of the border or ocean. Tax reform, including a border adjustable credit invoice VAT, a subtraction VAT to distribute benefits to workers and their families and an Asset VAT to close the tax gap, channel more ownership shares to employees and a negotiated rate to establish better international cooperation on business taxation.

The United States leaves millions of dollars on the table because we do not have a value added tax that is zero rated at the border, while applying to all goods and services imported. Please see the attachment, distilled from prior year comments, which explains how we propose to do this. Note that adding border-adjustable goods and services taxes allows the removal of other trade barriers with no loss of jobs. 

We do not agree with the Administration’s resolve to not raise taxes on anyone making under $400,000 per year. This proposal led to constant attempts to repeal the Affordable Care Act, not because of any flaw in the Act, but because of how it was funded with surtaxes on unearned income over $200,000. It is almost as if the Majority was setting a future Republcian Majority up (which happened rather quickly) to make itself look bad by having these votes. The constant repeal votes, however, provided no electoral advantage. 

Still, we agree that initially, VAT should not make some people poorer. When subtraction and a credit invoice VAT is first implemented, we propose doubling the child tax credit again so that families with children are not affected. A higher minimum wage ($10 now, $12 soon - or $11 with a 32 work week - and eventually $15) will indemnify the rest. 

During the transition, income tax withholding will be adjusted to increase net income by 13%. The additional 6.5% invoice VAT rate comes from eliminating employer payments for FICA (which has the effect of eliminating the cap (and crediting each worker with the same amount. 

All in all, our proposals are better for most of the working class than the status quo, although not everyone. Some people deserve to pay more. Please see our attachment on Tax Reform for more information.

We also propose a Carbon VAT, which is necessary for people to make spending decisions on the health of the planet (which is why carbon levies will be receipt visible rather than simply changing the price).

We propose an asset value tax with a compromise 26% rate (halfway between the current 24% and the Biden 28%. The asset VAT would mark option exercise and the first sale after inheritance, gift or donation, with zero rating for sales to Employee Stock Ownership Plans.

The first attachment on trade policy and the VAT includes how expanding employee ownership is the best trade policy for workers. Briefly, employee owners in the United States have an incentive to give foreign subsidiary and supply chain workers the same ownership rights and standard of living they receive. In order to do this, however, amendments to ERISA are necessary, as on paper owners will be paying more for the same products than they are paying now.

Attachment: Trade Policy

Attachment: Tax Reform