Will Washington Republicans succumb to Beltway-itis?

Steve Forbes,

You won’t find the disease Beltway-itis in a medical dictionary, but it’s nonetheless a very real affliction.

In the heady government atmosphere of Washington D.C., policymakers, politicos and bureaucrats too often forget or even show disdain for the people they supposedly serve.

The more time a person spends inside the Beltway, the more susceptible that individual becomes to this invidious mindset. Such a toxic, haughty attitude was a crucial factor in the rise of Donald Trump. The sense of “we know best” superiority can infect even those who mouth conservative principles of limited government.

In fact, an outbreak of Beltway-itis seems to be the only reasonable explanation for the border adjustment tax (BAT) fanatically being pushed by establishment Republicans in the House of Representatives. Make no mistake, the BAT will inflict American working families — the very people critical for Donald Trump’s election — a whole lot of hurt.

The border adjustment tax would impose a 20 percent sales tax on imports. American consumers would pay an extra $125 billion or more a year for everything from cars (even Detroit automakers are heavy importers of parts) to groceries. The price of gasoline for millions of motorists would go up 30 cents a gallon. It is a regressive tax that would financially damage middle-class and working families, seniors living on fixed incomes and all the many other Americans who already worry about paying their monthly bills.

The perversity of the border adjustment tax doesn’t stop here.

Big corporations like GE and Boeing would hit the jackpot under the BAT: their exports would be tax free. Boeing, for instance, is planning to sell aircraft worth billions of dollars to the mullahs of Iran. Those revenues would not be taxed.

In other words, working Americans would pay higher taxes to subsidize buyers in Iran, China and elsewhere.

How do Republicans afflicted with Beltway-itis justify this weird idea?

They say they need the money to finance other tax cuts. Huh? They want to impose a sweeping new tax in order to cut other taxes? The two great tax cutters of modern times — John Kennedy and Ronald Reagan — didn’t fall into this trap. The GOP should follow their example and go for a big, straightforward reduction.

“Revenue Neutrality” is another snare these two men avoided. After all, productive investments can take years to pay off. Skyscrapers don’t rise overnight.

Establishment Republicans also claim the dollar in foreign exchange markets would go up so that Americans wouldn’t notice they’re paying more at the gas pump and at Walmart and other stores. Even P.T. Barnum and the most shameless, 19th-century snake oil salesman wouldn’t have been able to keep a straight face with such an argument: Prices will go up but you won’t know it! The money will magically appear out of nowhere!

To belabor the obvious, if anyone could consistently predict what the dollar will actually do in today’s exchange markets, that person would be on Forbes’ list of global billionaires. Moreover, oil is priced in U.S. dollars on global markets. There is no disguising this tax.

These fantasists also assume other countries won’t react to what we do. They also have no real clue as to what impact this 20 percent tax would have on today’s incredibly complex global supply chains.

Finally, countries that count on currency manipulation to achieve prosperity end up with more impoverishment than good times. Ask Argentina, Brazil and Zimbabwe.

The BAT is a cousin to the Value Added Tax, which is found in most other countries. This leads to another bizarre argument establishment GOPers proffer: Other countries don’t apply their VATs to products sold outside their borders. Therefore, we should do the same thing — hit our consumers with a big sales tax that foreign buyers won’t have to pay. Ponder that: Raise the cost of living for millions of Americans so that foreigners can get a discount. Republicans call this “leveling the playing field.” A more accurate description would be leveling the American consumer.

The BAT is absolutely unnecessary to attract businesses and capital to our shores. Cutting the profits tax to 15 percent and minimally taxing - -or not taxing at all — overseas earnings would lead to a flood of money pouring into the U.S. Countless foreign companies would be eager to set up shop here.

Thankfully, Beltway-itis hasn’t infected the GOP on all issues. Most Republicans get it when it comes to health care. They know that if they don’t protect Americans who genuinely need a safety net, Democrats stand ready to charge them with callousness and cruelty to the least fortunate.

But on the BAT, Republicans have to cure themselves of this ailment if they want to rev up the economy — and avoid having to pursue other opportunities after next year’s elections.

Steve Forbes is Chairman and Editor-in-Chief of Forbes Media. His latest book, “Reviving America: How Repealing Obamacare, Replacing the Tax Code, and Reforming the Fed will Restore Hope and Prosperity” (McGraw-Hill Education, December 10, 2021).