Tags: Larry Kudlow | Paul Ryan | Donald Trump | Michelle Caruso-Cabrera

Larry Kudlow: GOP's Border Adjustment Tax Is 'Voodoo Economics'

Image: Larry Kudlow: GOP's Border Adjustment Tax Is 'Voodoo Economics'

(CNBC)

By    |   Tuesday, 17 Jan 2017 02:55 PM

President-elect Donald Trump is correct to criticize the House Republican plan to tax cross-border trade for being “too complicated,” said Larry Kudlow, who served as a senior economic adviser to Trump’s campaign.

Trump’s comments, which appeared in the Monday edition of The Wall Street Journal, were blamed for a decline in the value of the U.S. dollar.  The president-elect described the greenback as too strong compared with other currencies.

"Anytime I hear, 'border adjustment,' I don't love it,” Trump told the newspaper.

The border adjustment tax is part of a plan by Speaker of the House Paul Ryan to change the tax code in a sweeping overhaul. The levy is aimed at boosting U.S. factory production by taxing imports while exempting U.S. companies from taxation on their export revenues.

“Saying ‘imports are bad and exports are good’ — I think that's a lousy economic model. But unfortunately, it does have its followers,” Kudlow said in a CNBC discussion with senior reporter Michelle Caruso-Cabrera.

Kudlow also dismissed the non-partisan Tax Foundation’s estimates that the border tax would raise about $1 trillion in revenue in the next 10 years.

“That is just nonsense,” Kudlow said. “I hate to say this, but it's ‘voodoo economics’,” he added, echoing a phrase that Republican presidential candidate George H.W. Bush used to criticize Ronald Reagan’s supply-side proposals during the 1980 election.

Kudlow, a Newsmax Insider and radio-show host, said tax policy should emphasize economic growth instead of meddling with global trade.

“It's a lousy reason to make tax policy — in this case stopping imports, subsidizing exports, on the basis of what I'm going to call the 'phony scorecard revenue issue,'” he said. “The way to make policy is: is it good for growth? Does it create new incentives? Will it help people, companies large and small, minimum-income wage earners, the biggest beneficiary of corporate tax reform?”

In a separate discussion with Rep. Devin Nunes, a Republican from California, Kudlow said Republicans shouldn’t get sidetracked with the border adjustment tax.

“This is the kind of thing that could doom business tax reform, which in my opinion is the most important pro-growth element and really the heart of President-elect Donald Trump’s plan for economic growth and jobs,” said Kudlow, a Newsmax Finance Insider, radio talk-show host and CNBC senior contributor.

He criticized Mexico for enacting two value-added taxes on U.S. goods that made them less competitive with the country’s domestic producers.

“There’s a problem that exists, but this isn’t the right solution, and I don’t want a national value-added tax,” Kudlow said. “I don’t want a national sales tax. One of the issues here is that Mexico re-neged on the original deal back in 1994, adding a 5 percent VAT tax applied to imports from America.”

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President-elect Donald Trump's critique of a House Republican plan to tax cross-border trade is correct for being "too complicated," said Larry Kudlow, who served as a senior economic adviser to Trump's campaign.
Larry Kudlow, Paul Ryan, Donald Trump, Michelle Caruso-Cabrera
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2017-55-17
Tuesday, 17 Jan 2017 02:55 PM
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