Conservative National Review rips GOP’s 'terrible idea'

Republicans in Congress are set to discuss a new tax plan that could replace some aspects of Donald Trump's stalled tariff agenda, but even the conservative National Review sees the proposal as a "terrible idea."

Last month, the Supreme Court made a rare ruling against Trump's wishes and struck down his authority to levy sweeping tariffs on any and all countries without congressional approval, leaving him with limited options to keep those import taxes in place. In the wake of that ruling, the GOP-led Congress Joint Economic Committee convened a hearing for Wednesday, where they will discuss the idea of introducing a "destination-based cash flow tax."

Writing for the National Review on Wednesday morning, conservative economic analyst Jack Salmon said that this proposal was little more than "a recycled version of the border adjustment tax (BAT)," an idea that was "so flawed that it divided Republicans and nearly derailed the 2017 tax reform effort."

As Salmon explained, a border tax would impose a new tax on imported goods, while exempting items exported to other countries. Several GOP lawmakers, he suggested, appear convinced that this piece of tax reform could be used replace the "trade protection" aspect of Trump's tariffs.

According to Salmon, however, the circumstances needed for a border tax to work out are dicey, and "often fail."

"A BAT, which taxes imports while exempting exports, rests on the questionable assumption that the U.S. dollar will quickly appreciate by roughly 25–30 percent to offset the import tax and export subsidy," Salmon explained. "In theory, this adjustment would shield American consumers from higher prices while giving exporters a boost. But the theory doesn’t hold water."

He continued: "International currency markets are unpredictable at best, chaotic at worst. Models that predict a clean currency adjustment often fail to account for real-world complexities like monetary policy, capital flows, global risk sentiment, relative growth expectations, and geopolitical shocks. History shows that exchange rates rarely adjust fully or quickly to policy changes. Instead, they shift partially and gradually, leaving importers, and ultimately consumers, to foot the bill."

The result of this sort of policy, Salmon noted, "disproportionately" impacts lower-income households more than anyone else, since they tend to spend more of their money on imported goods. Similar criticisms were leveled against Trump's tariffs, with opponents decrying them as a regressive tax.

"If imports become more expensive, the tax burden will fall hardest on those least able to afford it, making the BAT a regressive policy disguised as a corporate tax reform," Salmon wrote, later adding, "Traditionally, Republicans built their brand on fiscal responsibility and free markets. Embracing the BAT would not only betray these principles, but also saddle Americans with higher costs, fewer choices, and diminished economic freedom."

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