Posts Tagged ‘tax reform’

Sales Factor Tax Apportionment is Better than G-7 Tax Proposal

Tuesday, June 22nd, 2021

For many years, the Organization for Economic Cooperation and Development (OECD) has been coordinating talks among 140 countries on cross-border tax reform in order to get multi-national corporations to pay their fair share of taxes.  Currently, multinational corporations that have subsidiaries or divisions in other countries use legal accounting strategies to reduce their taxes by transferring profits to lower corporate tax rate countries or set up shell corporations in tax haven countries. It’s not fair for multinational firms to sell products in the U.S. market and then pay little or no federal taxes on the resulting profits. Domestic companies bear the brunt of our country’s tax burden, making it more difficult for them to compete in the global marketplace.

On June 5th, the G-7, which is an informal grouping of seven of the world’s advanced countries:  Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, reached an agreement on two pillars of global tax reform.

Pillar One of the agreement “changes allocation of taxing rights. Under the proposal, companies wouldn’t only owe taxes where they’re established and have assets and employees, but would also owe taxes where they have sales.” This new rule would apply to only the world’s 100 largest and most profitable companies.

Pillar Two “imposes a global minimum tax on potentially any company that has a low effective tax rate on foreign earnings. If companies pay lower rates in a particular country, their home countries could “top-up” their taxes on foreign earnings to the minimum rate, removing the benefits of shifting profits. A proposed global minimum tax rate of “at least 15 percent on a country by country basis,” is designed to discourage multinational corporations from shifting profits to low-tax countries. Hopefully, a “worldwide minimum corporate tax rate would reduce the attractiveness of tax havens, which have increasingly become a common part of global business practice in the last three decades.”

“Corporate profit shifting into tax havens by U.S. multinationals has jumped from roughly 5 to 10 percent of gross profits in the 1990s to roughly 25 to 30 percent in 2019, according to a report by the International Monetary Fund. And the use of tax havens costs governments $500 billion to $600 billion per year in lost corporate tax revenue, according to a study cited by the IMF.”

Daniel Bunn, vice president of global projects at the Tax Foundation, told the Epoch Times, “This agreement is subject to further agreements, there’s a lot of work still to be done to ensure that the policy works well. “I’m concerned that if policymakers aren’t careful, they could impact global foreign direct investment flows and hurt business investments globally.”

“It is a whole new way of doing tax policy for multinationals. And one of the reasons I think that Treasury has tried to limit this to the 100 largest companies is because it has the potential to be really, really complex,” Bunn said.

One advantage of the proposed global minimum tax is that it could potentially end the discussion of digital services taxes on big tech companies, more of which are in America than any other country.

One potential problem is whether OECD would be the organization that would designate the top 100 companies in the world. If so, what criteria would they use and how often would the rating be updated, as the ranking could fluctuate from year to year.

Another consideration is what would be the impact of a 15 percent global minimum tax on U.S. companies combined with the substantial tax increases proposed by President Joe Biden that includes a 15 percent minimum tax on large corporations’ book income, as well as increases to the tax rates on both domestic and foreign income.

These two pillars will be the subject of the meeting of the G-20 countries scheduled for later this summer.

On June 8th, the Coalition for a Prosperous America (CPA) issued a statement, saying they “support the Organization for Economic Cooperation and Development’s (OECD) efforts ‘to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.’ This represents a positive step towards eliminating the ability of multinational companies to avoid paying U.S. corporate tax by shifting profits offshore to tax havens.”

“While not perfect, the G7 announcement represents a positive step forward, especially for family companies like mine that pay a higher corporate tax rate than foreign and multinational competitors,” CPA Chair Zach Mottl said. “To truly end the game of multinational profit shifting, the OECD should implement Sales Factor Apportionment.”

“For too long, multinational corporations have used an army of lawyers and tax accountants to offshore production and avoid U.S. corporate taxes,” said Michael Stumo, CEO of CPA. “It is welcome news that the G7 economies are supportive of addressing the harm to domestic producers from multinational profit shifting. However, it is concerning that the G7 announcement would allow the first 10 percent of profits to be exempt, which would allow some profit shifting to still occur. The Biden administration, which called for implementing Sales Factor Apportionment for the top 100 multinational corporations, should urge the G7 economies and the OECD to fully implement a sales-based apportionment system for all companies shifting profits.”

This OECD proposal would be similar but more limited in scope to the Sales Factor Tax Apportionment (SFA) framework supported by the Board of the Directors of Coalition for a Prosperous America since 2017. One of CPA’s members, Bill Parks, a retired finance professor and founder of NRS Inc. was the originator of the SFA framework. Mr. Parks stated “Currently MNEs manipulate loopholes in our tax system to avoid paying U. S. taxes…MNEs can legitimately choose a cost that reduces or increases the profits of its subsidiaries in different countries. Because the United States is a relatively high-tax country, MNEs will choose the costs that minimize profits in the United States and maximize them in what are usually lower-tax countries.” 

Under SFA, the amount of corporate taxes that a multinational company would pay “would be determined solely on the percent of that company’s world-wide sales made to U. S. customers. Foreign MNEs would also be taxed the same way on their U. S. income leveling the playing field between domestic firms and foreign and domestic MNEs.” Thus, if a company generates $1 billion of profit on its U.S. sales, then it should pay corporate taxes on that $1 billion.

On May 18, 2017, CPA submitted written testimony to the House Ways and Means Committee, stating in part, “The US corporate tax system harms America’s trade competitiveness, overtaxes income from wages, under taxes consumption, and is bad at actually collecting what is owed. It also enables rampant base erosion through transferring profits to tax havens or countries with lower corporate tax rates. Full reform centered around destination based, border adjustment principles can result in an efficient, trade competitive, and largely tamper-proof tax system. SFA is a destination-based profit tax. Pretax income is allocated to the US in proportion to the percentage of a company’s total sales in the U. S. Pre-tax income earned outside the US is not taxed. Tax rates can be lowered substantially while still meeting revenue targets…SFA eliminates the disparate tax treatment between domestic companies (who pay the full income tax burden on worldwide income), multinationals (many of which shift profits to tax havens), and foreign companies (which pay a territorial income tax).” 

In September 2020, ”CPA published an analysis of the federal corporate tax paid by the S&P 500 companies in 2019 and found they paid on average less than 9% in cash federal tax last year. The analysis also found that by replacing the current corporate tax system with an SFA system at 21 percent, the United States could have expected to earn an additional $97.8 billion in federal corporate tax receipts for 2019.”

If the OECD doesn’t expand Pillar One into a SFA plan for all multinational companies, not just the top 100, then the U. S. Congress should act unilaterally to establish this plan here. Multinationals should no longer be allowed to employ convoluted profit calculations or reincorporate in a tax haven country as a means to avoid U.S. tax obligations. We need to take bold action if we want to rebuild our American manufacturing industry to create jobs and prosperity.

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Second Day of CPA Conference Focuses on Tax Reform

Tuesday, April 13th, 2021

The second day of the CPA virtual conference held March 23-27th featured two panels: the first on the topic of “Reforming Corporate Taxation to Help Reshore Our Industries,” and the second on ”Buy American.”   In the first panel, the focus was on whether or not additional tax reform is needed by Congress to make sure that tax loopholes that currently favor multinational corporations over domestic companies will be closed.

The Tax Cuts and Jobs Act of 2017 (TCJA) reduced corporate tax rates to a flat tax of 21% from a graduated tax system ranging from a low of 15% to a high of 35%.  At the time, the U. S. had the highest corporate taxes in the world after Japan had reduced their corporate tax rate to 30.86% in 2016, down from a high of 40.69% in 2010.

David Morse, CPA Tax Policy Director, moderated the panel, which began with a tribute to Bill Parks for his work on Sales Factor Apportionment. Mr. Parks is Founder and President, Northwest River Supplies and Founding Director, SalesFactor.org, “which works to advance tax policy that would level the playing field between domestic and multinational corporations, improve U.S. competitiveness in world markets, and foster the long-term health of the American economy.”

Simply stated, Sales Factor Tax Apportionment would tax U. S. and foreign multinational corporations based on their sales in the United States. In other words, the profit a company generates on its U.S. sales would be taxed. These taxes would have to be paid to do business in the U. S.  This would eliminate profit shifting to divisions in other countries or claiming residence in a country with lower or no corporate taxes in order to avoid U.S. tax obligations.

Senator Bill Crapo (R-ID) participated in the panel with a pre-recorded video in which he paid tribute to the work of Bill Parks, whose company is in his state.  He touted TCJA for reducing corporate taxes and stated that it stemmed offshoring of American manufacturing and helped reshoring.  He said that we could strengthen TCJ with legislation on Sales Factor Tax Apportionment.

Representative Bill Pascrell (D-NJ) also participated in the panel with a pre-recorded video.  Rep. Pascrell is on the Ways and Means Committee in the House, and he said that the current tax system is tilted to wealthy and large corporations at the expense of small to medium-sized businesses.  In his opinion, TCJA wasn’t tax reform, and real tax reform is needed.

Ji Prichard, who is Tax Counsel on the House Ways and Means Committee, shared that tax reform is under discussion in the committee.  President Biden’s “Build Back Better” campaign plan had a “carrot and stick” approach to reshore manufacturing – a 10% tax credit for reshoring and a 10% fine for offshoring. 

The third panelist Professor Reuven Avi-Yonah, Irwin I. Cohn Professor of Law and director of the International Tax LL.M. Program at the University of Michigan.  Professor Avi-Yonah has written extensively on the subject of taxes. He supports the Sales Factor Tax Apportionment because he believes that it will solve a major problem in the tax code:  tax avoidance by multinational corporations through profit shifting to offshore entities and reincorporating in tax haven countries. The problem with the OCED tax proposal is that it is only focused on digital transactions that would hurt American high-tech companies. He believes that SFA could be applied unilaterally.

The Buy American Panel was moderated by the Co-Chairs of the CPA Buy American Committee: Greg Owns, CEO, Sherrill Manufacturing and Liberty Tabletop, and Jim Stuber, Founder of Made in America Again and author of What if Things were Made in America Again.

Senator Tammy Baldwin (D-WI) participated in the panel via a pre-recorded video.  She said, “Wisconsin is a state that makes things. We are #1 or #1 in manufacturing of paper, tools, and ships.  It is very important that we produce the things that keep us safe and healthy. When the pandemic started, we saw a shortage of masks, gloves and other PPE. The American Rescue Plan for COVID relief included 10 billion dollars for government purchase of essential goods under the Defense Production Act.” She also said, “The pandemic made it clear that we need country of origin labeling (COOL) for online purchases.  I appreciate CPA’s help in drafting a bill. There are lots of gaps in the Buy American policy for infrastructure. Trade deals have provisions that give foreign companies the right to bid on government procurement. There are 16 countries that can bid as if they are an American company.  But the President can waive these provisions of trade deals in emergency situations.”

Senator Cynthia Lummis (R-WY) participated in a live video, and she said, I support country of origin labeling.  I am a lifelong rancher. We need more domestic products.  Wyoming has rare earth minerals and is an energy producing state.  Buying local and buying American grew in importance during the last year.  I think food security is a national security issue.  You can count on me as an ally on Buy American.”

Representative Claudia Tenney (R-NY) said she is the representative for the district in which Greg Owen’s company is located and also where Revere Copper is located (owned by Brian O’Shaughnessy, CPA’s Vice Chair.) She said that 94% of workers in her district work for small businesses. She also supports Buy American and country of original labeling.

The last panelist was Brad Markell, Executive Director of the AFL-CIO Industrial Labor Council.  He said, “This is the manufacturing arm of the AFL-CIO that includes the presidents of all of the unions in the manufacturing industry. The Trump Administration made great strides on Buy American. The Biden administration left these Executive Orders in place and have added two more E. O.s related to Buy American and supply chain.  Too many government agencies have waivers for Buy American. The manufacturing component of infrastructure is high for construction. Every time the federal government spends money is an opportunity to create jobs.”

The day’s session ended with closing remarks by Bill Bullard, CEO of the Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA).  He said, “The cattle industry is the single largest segment of U.S. agriculture generating about $65 billion in sales. There are about 729,00 farmers and ranchers in the U.S., down about a half million the past 40 years. Farmers and ranchers are scattered across the country and in nearly every county. Since 1990, we have lost 200,000 cattle ranches and millions of cattle. The U.S. underproduces cattle to supply demand and imports are increasing.  We import beef from 20 countries and about two million live cattle from Canada and Mexico each year. Since NAFTA, the amount of beef we import from Canada and Mexico has tripled, so that we’ve accumulated a $40 billion deficit. Retail prices have risen, especially since 2017, but the rancher’s share of the price has drastically dropped.  This is because there are only four meat packing plants in the U.S. and two are owned by Brazilian companies, so when you have many sellers and few buyers, the price drops.”

Bill’s proposed solution to this problem is country of origin labeling for retail sales that states where the cattle was born, raised, and slaughtered.  Imported beef that is repackaged must also reveal the country from which it is imported. This would be non-discriminatory to all countries. He also stated that “Buy American” policies for federal procurement should require that beef procured for school food programs and the military should fit the criteria of born, raised, and slaughtered in the U. S.  He urged everyone to contact their Congressional Representative and Senator to support country of original labeling for beef.  

We learned a hard less during the COVID pandemic about the dangers of being reliant on foreign countries for our pharmaceuticals and PPE. We must not allow foreign imports of beef and foreign ownership of meat packers to endanger the largest segment of agriculture products. Protecting the safety of our food production is a national security issue.

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Comparing Trump’s and Biden’s Policies that Support Rebuilding American Manufacturing

Tuesday, October 20th, 2020

For those of us who support the Made in America/Buy American movement and want to rebuild American manufacturing by returning manufacturing to America through reshoring from China, it’s important to consider the policies of President Trump and former V.P. Biden in their bid to be president.  Two policies, tax rates and the cost and availability of energy, have a major effect on where a company chooses to locate their manufacturing or headquarters if they have multiple plants globally. If the corporation has a plant in a country with a lower tax rate, they may choose to shift their profits to the subsidiary in that country.  Bulgaria and the Czech Republic at 10% and Ireland at 12.5% have the lowest corporate tax rates in Europe. American manufacturers that don’t have plants in other countries face the brunt of the tax burden. Personal tax rates are also important as only 30-35% of manufacturers are C corporations; the others are LLCs, partnerships or sole proprietorships where taxes are passed through to the owner(s).

Taxes

Biden’s Tax Policies:

  • Raise the corporate tax rate to 28%.
  • Require a true minimum tax of 21% on ALL foreign earnings of United States companies located overseas (double the current rate). 
  • Impose a tax penalty on corporations that ship jobs overseas in order to sell products back to America.
  • Impose a 15% minimum tax on book income so that no corporation gets away with paying no taxes.
  • Raise the top individual income rate back to 39.6%.
  • Require those making more than $1 million to pay the same rate on investment income that they do on their wages.

Trump’s Tax Policies:

The U.S. had a corporate tax rate ranging from a low of 15% to a high of 35% until the Tax Cuts and Jobs Act (TCJA) was passed by Congress on December 20, 2017, which reduced the corporate tax rate to flat tax of 21%. TCJA also cut capital gains tax to 15 % and increased the estate tax basic exemption amount from $5 million to $10 million.

President Trump’s tax policy platform for re-election focuses largely on promoting and preserving the tax cuts of TCJA and making various tax rate reductions scheduled to expire in 2025 permanent.  Before the Republican convention, his campaign released his agenda, which included:

  • Cutting taxes “to boost take-home pay and keep jobs in America”
  • Enacting “Made in America” tax credits
  • Expanding opportunity zones
  • Enacting new tax credits “for companies that bring back jobs from China
  • Permitting 100% expensing “for essential industries like pharmaceuticals and robotics that bring their manufacturing back to the United States.”

Energy

Biden’s Policies:

Biden’s campaign website.states that he plans to “Move ambitiously to generate clean, American-made electricity to achieve a carbon pollution-free power sector by 2035. This will enable us to meet the existential threat of climate change while creating millions of jobs…”

His plan is for America to achieve a 100% clean energy target by means of:

  • advanced nuclear reactors, that are smaller, safer, and more efficient at half the construction cost of today’s reactors;
  • refrigeration and air conditioning using refrigerants with no global warming potential;
  • using renewables to produce carbon-free hydrogen at a lower cost than hydrogen from shale gas through innovation in technologies like next generation electrolyzers;
  • decarbonizing industrial heat needed to make steel, concrete, and chemicals and reimagining carbon-neutral construction materials
  • leveraging research in soil management, plant biologies, and agricultural techniques to remove carbon dioxide from the air and store it in the ground; and
  • capturing carbon dioxide through direct air capture systems and retrofits to existing industrial and power plant exhausts, followed by permanently sequestering it deep underground or using it to make alternative products like cement.”

Trump’s Policies:

  • Since he took office, President Trump has rolled back hundreds of environmental protections, including limits on carbon dioxide emissions from power plants and vehicles, and protections for federal waterways across the country, fulfilling a campaign promise from 2016.
  • On June 1, 2017, Trump announced the U.S. withdrawal from the Paris Climate Agreement, saying the deal disadvantaged the US “to the exclusive benefit of other countries.”
  • His administration approved oil and gas drilling in Alaska’s Arctic National Wildlife Refuge, which has been off-limits for drilling for decades.
  • President Trump supports development of all forms of energy without subsidies, including production of natural gas through fracking

Trade/Tariffs

Biden’s Policies

  • Take aggressive trade enforcement actions against China or any other country seeking to undercut American manufacturing through unfair practices, including currency manipulation, anti-competitive dumping, state-owned company abuses, or unfair subsidies.
  • Rally our allies in a coordinated effort to pressure the Chinese government and other trade abusers to follow the rules and hold them to account when they do not.
  • Confront foreign efforts to steal American intellectual property.
  • Address state-sponsored cyber espionage against American companies.
  • Apply a carbon adjustment fee against countries that are failing to meet their climate and environmental obligations to make sure that they are forced to internalize the environmental costs they’re now imposing on the rest of the world.

Trump’s Policies:

  • On January 23, 2017, Trump signed an order to withdraw from further negotiations on the Trans-Pacific Partnership.
  • On September 2, 2017, Trump instructed aides to withdraw from the U.S. trade agreement with South Korea and later renegotiated a better trade agreement.
  • On August 16, 2017, the Trump administration began renegotiating NAFTA with Canada and Mexico. NAFTA was replaced with the new United States–Mexico–Canada Agreement (USMCA), signed on November 30, 2018.
  • On January 22, 2018, Trump imposed tariffs and quotas on imported solar panels and washing machines.
  • ? On March 1, 2018, he announced a 25% tariff on steel imports and a 10% tariff on aluminum.
  • On April 3, 2018, Trump announced 25% tariffs on $50 billion in Chinese imported electronics, aerospace, and machinery.
  • On April 6, 2018, Trump announced tariffs on $100 billion more of Chinese imports.
  • On October 7, 2019 the United States and Japan signed two agreements intended to liberalize bilateral trade. The U.S.- Japan Trade Agreement (USJTA) provides for limited tariff reductions and quota expansions to improve market access.
  •  On January 15, 2020, President Trump and Vice Premier Liu H of China the US–China Phase One trade deal in Washington DC.

Buy American/Made in America

Biden’s Policies:

  • Make a $400 billion Procurement Investment in American products, materials, and services and ensure that they are shipped on U.S.-flagged cargo carriers.
  • Retool and Revitalize American Manufacturers, with a particular focus on smaller manufacturers and those owned by women and people of color, through specific incentives, additional resources, and new financing tools.
  • Make a New $300 Billion Investment in Research and Development (R&D) and Breakthrough Technologies 
  • Bring Back Critical Supply Chains to America so we aren’t dependent on China or any other country for the production of critical goods in a crisis.
  • Tighten domestic content rules to require more legitimate American content
  • Crack down on waivers to Buy American requirements by federal Agencies
  • End false advertising by companies that label products as Made in America even if they’re coming from China or elsewhere
  • Strengthen and enforce Buy America provisions
  • Update international trade rules and associated domestic regulations for Buy American

Trump’s Policies:

Trump’s campaign slogan revolves around continuing his promise to Make America Great Again. One of the ways is to rebuild American manufacturing and create higher paying jobs. He uses protectionism to defend U.S. industries from foreign competition. According to the National Association of Manufacturers (NAM), the U.S. manufacturing sector, added about 450,000 workers during the first three years of Trump’s presidency before the pandemic. Here are some of the actions he has taken as President.

President Trump’s campaign website also lists the following goals for his next term:

  • Reduce U.S. dependence on Chinese manufacturing and bring back 1 Million Manufacturing Jobs from China
  • No Federal Contracts for Companies who Outsource to China
  • Grant tax credits to companies that move manufacturing back to United States; tariffs on those that don’t.

Remember that actions speak louder than words, so be sure to compare what a candidate has done and not just what they promise to do in their campaign platform. Be sure to vote. The future of our country is at stake.

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CPA’s Balanced Trade Message has Impact on Congress

Wednesday, April 27th, 2016

I just returned last Friday night from the Coalition for a Prosperous America‘s 9th annual Fly-In to Washington, D. C. It was my 4th time to participate with CPA members from across the country to meet with Congressional Representatives and/or their staff. I noticed a big difference in the reception we got during our visits compared to my first trip. The Coalition for a Prosperous America is a nonprofit organization representing the interests of 2.7 million households through our agricultural, manufacturing and labor members, and I’ve been a member since 2011.

In his report, CEO Michael Stumo wrote, “It was an amazing experience to finally have the wind at our backs instead of facing headwinds…CPA is taken very seriously by congressional offices. They trust what we say. One-fourth of our meetings included the congressman/woman themselves, which is significant and a new high for us. Senior staffers attended our meetings rather than junior staffers as was the case only a few years ago.”

However, we have not just been doing an annual visit to D. C. once a year since 2008. Teams of CPA members led by Michael Stumo have made visits to D. C. once or twice a month since January 2015. Here in California, teams of members led by me have visited the offices of 37 of the 53 Representatives from one to six times since 2013. In addition, CPA has co-hosted four manufacturing summits in California starting in 2013 ? two in San Diego, one in Orange County, and our recent one in Sacramento in February. The same kinds of activities have taken place in other states where CPA has a state chapter, such as Ohio, New York, and Pennsylvania.

In all of our visits, either in district or in D. C., we have constantly focused part of our message on simply establishing why our huge trade deficit not only matters, but is core to our national economic malaise. As I have written in past articles, our annual trade deficit over the past 20 years has a relationship to our national debt and is a major cause of the loss of 5.8 million manufacturing jobs and the nearly 95 million people that are no longer part of the workforce.

For years, we have been emphasizing the following:

  1. Trade deficits matter, they kill jobs and growth: This may sound obvious to you and me, but many Representatives and their staffer did not believe trade deficits mattered in the past. They were unwilling to admit the serious consequences in having a huge deficit in goods. So, if trade deficits were not a problem, there was no need to pursue a solution. Michael Stumo wrote, “This past week showed we have largely won that argument. We can only grow jobs and our economy if we focus upon a national strategy to balance trade by identifying the biggest trade cheating problems and aggressively fixing them.”

Our teams distributed a flyer titled, “Balanced Trade: Fighting the New Mercantilism” recommending that Congress establish a national goal to balance trade over a reasonable period of time by means of:

  • Direct trade negotiators to pursue trade deficit reduction as a primary negotiating objective.
  • Review past agreements for compliance with this objective. Renegotiate those that fail the test.
  • Utilize tax, fiscal and monetary policies to achieve the goal.
  • Aggressively and systematically attack and neutralize foreign mercantilism.
  1. Past trade agreements have not improved our trade performance: For years, we have heard this line from the establishment and Congressional Representatives: “Trade agreements establish American leadership, grow exports and create jobs.” The refrain was: “Trade is beneficial. We are increasing exports, and we have a surplus in services.” The only time I heard this refrain this year was by a legislative assistant in Senator Dianne Feinstein’s office.

We were able to trounce this argument this year by distributing a flyer that clearly showed the poor trade performance of our past agreements through visual aids CPA spent a lot of time developing (see below). We clearly showed that modern foreign mercantilism has moved beyond the tariff and non-tariff barrier provisions in trade deals. Indeed, those deals often made our trade problems worse. For example, our trade deficit with Korea has nearly doubled since it went into effect in 2012 (from $14.7 billion to $28.4 billion in 2015.)

The TPP will likely make America worse off: CPA read and digested the pro-TPP studies by Petri and Plummer, Peterson Institute for International Economics, Working Paper 16-2, Jan 2016 and the “Global Economic Prospects: Potential Macroeconomic Implications of the Trans-Pacific Partnership,” by the World Bank, Jan 2016. These reports tried to hide the problems and exaggerate gains. Our CPA teams distributed a flyer that “displayed the results through insightful infographics showing that any projected gains were embarrassingly meager and fundamentally implausible”[because] “The studies assume, without analysis, (a) no currency misalignment, (b) no foreign border taxes that replace tariffs, (c) no industrial subsidies and state-influenced enterprises, and (d) no mercantilism.” As Michael Stumo wrote, “These assumptions are untrue. Therefore, we cannot achieve the meager growth projected. We showed how those studies were built upon a series of demonstrably false assumptions to produce those meager gains. Then we showed why losses to American workers, industry and the economy were nearly certain when you eliminated the false assumptions.”


This year we also proposed tax reform that can fix some major foreign trade cheating on a large scale. As Michael Stumo, wrote, “Tax reform is a challenge because K Street lobbyists rig the game for special interests and no connection is made with our success in producing here and winning the international trade competition. However, we made significant gains in showing how we can fight foreign consumption taxes that act as tariffs by smartly adding a US consumption tax and funding the reduction of other regressive taxes and costs to fix the problem. We also showed how we can fix the corporate income tax system with sales factor apportionment to halt tax haven abuse by transnationals, incentivize US domestic production, and make foreign companies pay their fair share of income tax when selling into the lucrative American market.”

The good news is that everyone we saw seemed to agree that the TPP does not have the votes to pass before the election. The danger will be in the “Lame Duck” session. We seem to be in a far better position to prevent future passage than we were last year at this time with regard to passage of the “Fast Track” Trade Promotion Authority. Michael Stumo, wrote, “We almost beat Fast Track last June. Indeed we won the first votes in regulation time but lost in overtime when the Empire Struck Back. Now, it seems that the anti-Fast Track block is holding strong and quite a lot of pro-Fast Track congressional members have either declared opposition to TPP or are leaning against it.”

Michael added, “GOP House leadership pushed Fast Track through last year but they seem to view TPP as toxic now. The GOP rank and file are letting House leadership know they do not want to vote on TPP at any time in the foreseeable future. The Senate side is less solid and has always posed the bigger challenge. Senate majority leadership wants changes to TPP but still wants get to ‘yes.’ However, the changes being demanded are difficult (but perhaps not impossible) to deliver.”

We are being helped by the stand against trade agreements by two of the major presidential candidates, Trump and Sanders, who bring up our broken trade policy in almost every speech. “Trade has become one of the few, rare ‘voting issues’… an issue that actually moves voters to support or oppose a candidate.”

While this has been a several year battle, we haven’t won yet and still have a lot to do. The establishment will continue say that the voters simply don’t understand the “greater good.” Pundits will continue to write many “reasoned” articles about why the voters should support trade agreements such as the TPP. But the success of Trump and Sanders shows that the establishment has not only lost its clout, it is actively disbelieved by many now.

Help us to grow this movement and increase our effectiveness. Encourage your friends and colleagues to participate. Let’s keep up the good fight!

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