Trump can lock in tax reform gains by rejecting trade tariffs

Trump can lock in tax reform gains by rejecting trade tariffs
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As the sun sets on 2017, Congress has concluded the most significant reform of the American tax system in three decades. In addition to sizeable across-the-board reductions in individual tax rates, there are tax cuts for businesses large and small.

In the aftermath of such a positive step forward, it’s easy to become locked into a narrative of accomplishment. But even after tax reform, a plethora of proposed taxes continue to threaten taxpayers and consumers on the federal level.

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If tariffs continue to be embraced by the administration, any taxpayer relief afforded by newly-signed legislation will be overshadowed by price hikes across the economy.

 

Earlier this year, residential appliance producer Whirlpool filed a safeguard petition under Section 201 of the Trade Act of 1974 claiming that an increase in certain washing machine imports — specifically from LG and Samsung — has seriously injured the domestic industry. United States International Trade Commission (USITC) officials have proposed imposing a 50-percent tariff on large residential washing machines imports.

While Trump administration officials have stubbornly clung to the idea of tariffs as a way to safeguard domestic competitors against foreign rivals who allegedly play unfair, the blurring lines caused by globalization considerably complicates the “us versus them” mentality.

Despite being based elsewhere, companies like Samsung and LG are responsible for thousands of jobs created in the United States, and attempts to punish them for providing lower prices for customers can easily harm job and wage growth in places like Tennessee and South Carolina

Growing tariff talk in the Trump administration isn’t limited to washing machines. Suniva and Solar World, two American-based solar energy companies, have also invoked the Trade Act of 1974.

At the end of January, the president will have to decide whether to impose tariff rates of around 30 percent on foreign solar panel and cell manufacturers. Given that the president recently resolved in Asia to “no longer tolerate these chronic trade abuses,” there’s a decent chance that approved tariff rates may go above and beyond USITC recommendations.

At first glance, the case for solar tariffs appears to be stronger than that for washing machines. As the Taxpayers Protection Alliance and other organizations have pointed out, rooftop solar adaptation coupled with net metering means higher costs imposed on non-solar neighbors.

Keeping the price of solar artificially high can limit this trend and potentially reduce the harm of net metering policies. Since foreign solar competitors are mainly state-run corporations that have a negligible foreign presence, harming Asian producers wouldn’t directly harm American job growth.

Upon closer inspection, the case for tariffs falls apart. The renewable sector is one of the most heavily-subsidized industries in the United States, making claims of an unlevel playing field specious to say the least. In addition to a plethora of production and investment tax credits at the federal and state level, crony initiatives like SunShot give these companies an edge by artificially lowering development and deployment costs.

What's more, the cutbacks in utility deployment predicted by the GTM report would mean price hikes for ratepayers in states where “renewable” energy is mandated to be part of energy portfolios. Like regular taxes, raising one rate can trickle to other areas of the economy, ensnaring countless individuals, families and businesses along the way. 

After the long, hard slog of tax reform, it’s natural to ask what is next. With large, looming tariff decisions that need to be decided early next year, the administration can show its continued resolve to keep the tax burden low across America.

While tariffs are a seductive way to keep America a step ahead of competitors, the tangled global economy means that any attempt to punish the competition will boomerang back to the United States.

By rejecting USITC recommendations for higher tariffs, the president can cement recently-enacted tax reform and protect Americans from high costs and job destruction.

Ross Marchand is the director of Policy for the Taxpayers Protection Alliance, an organization that advocates on behalf of free markets and limited government intervention.