When will downwardly mobile Americans rebel?

[sadsack]

Re: When will downwardly mobile Americans rebel?

It’s even worse than that, Lukester. The US government’s globalization policy, rather than leveling the playing field between the US worker and the foreign worker, has actually tilted it sharply away from the US worker.

Decades ago, before the globalization and free trade kick took root here, a US consumer who hired his neighbor across the street to make something for him payed a large embedded tax in the form of the income tax. If he hired someone overseas to do the same, he payed a large embedded tax in the form of duties and tariffs. This roughly put the US worker and his foreign counterpart on an even keel. When the free trade movement took hold, they got busy stripping away the taxes on the imported foreign goods, but forgot about those on the domestic ones. Pretty much the same goes for the regulatory burden. The result is that the US government’s tax policy as a whole puts the American worker really behind the eight ball as compared to his foreign counterpart.

It's even worse than this when one considers the double-bitch slap that domestic producers have to take when exporting to countries using a VAT regime.

Under GATT/WTO, countries with VAT "reimburse" their producers for the VAT they have already paid on a product, if that product is for export to a country that does not have a VAT. Most industrialized countries have a 10-15% VAT, but the US has no VAT, so this amounts to a 15% subsidy on products exported to the US.

Now, goods imported to a VAT country have VAT applied if the VAT in the exporting country is lower than that of the importing country. Since the US has no VAT, this amounts to a 10-15% tariff on American exports to VAT countries.

Wow, try producing goods domestically for export in the face of a 20-30% automatic pricing disadvantage. . .

[Finster]

Re: When will downwardly mobile Americans rebel?

It's even worse than this when one considers the double-bitch slap that domestic producers have to take when exporting to countries using a VAT regime.

Under GATT/WTO, countries with VAT "reimburse" their producers for the VAT they have already paid on a product, if that product is for export to a country that does not have a VAT. Most industrialized countries have a 10-15% VAT, but the US has no VAT, so this amounts to a 15% subsidy on products exported to the US.

Now, goods imported to a VAT country have VAT applied if the VAT in the exporting country is lower than that of the importing country. Since the US has no VAT, this amounts to a 10-15% tariff on American exports to VAT countries.

Wow, try producing goods domestically for export in the face of a 20-30% automatic pricing disadvantage. . .

Excellent point, Sadsack. One could raise the objection to my above argument that other countries impose taxes of their own. But they may also be doing things to offset (or even more than offset) their impact on trade. They may be tax-related, they may be currency-related, maybe regulatorily-related, whatever. But to deal with them directly puts the US in the position of having to hector other countries about their own internal policies, not exactly something that endears the US to them. Not to mention marginally effective at best. Far better to tend to our own imbalanced policies first. Either restore import taxes to the point of balance or scrap the whole mess in favor of an across-the-board consumption tax, which would at least equalize the burden between domestic and foreign producers.

[WDCRob]

Re: When will downwardly mobile Americans rebel?

It’s even worse than that, Lukester. The US government’s globalization policy, rather than leveling the playing field between the US worker and the foreign worker, has actually tilted it sharply away from the US worker.

Decades ago, before the globalization and free trade kick took root here, a US consumer who hired his neighbor across the street to make something for him payed a large embedded tax in the form of the income tax. If he hired someone overseas to do the same, he payed a large embedded tax in the form of duties and tariffs. This roughly put the US worker and his foreign counterpart on an even keel. When the free trade movement took hold, they got busy stripping away the taxes on the imported foreign goods, but forgot about those on the domestic ones. Pretty much the same goes for the regulatory burden. The result is that the US government’s tax policy as a whole puts the American worker really behind the eight ball as compared to his foreign counterpart.

Wouldn't this tilt only be relevant in terms of the gap between domestic taxes here vs domestic taxes "over there?" If domestic workers are paying a 30% tax, but foreign workers are paying the same percentage tax in their home country wouldn't it net out?

[Finster]

Re: When will downwardly mobile Americans rebel?

Wouldn't this tilt only be relevant in terms of the gap between domestic taxes here vs domestic taxes "over there?" If domestic workers are paying a 30% tax, but foreign workers are paying the same percentage tax in their home country wouldn't it net out?

Just addressed that in the last post ...