Our Next Recession

Are you ready for massive price increases form the hidden Trump tax proposals? Two maybe coming that will result in higher prices and most people will have no clue why the prices are going up, yet they are being told something else.

The first is the “Wall Tax” the people is being told the beautiful great wall will be paid for by Mexico, Well guess again. It will be paid b=for by the American Taxpayers and consumers. President Trump has proposed a 20% tariff on good imported form Mexico to pay for the wall. How to tariffs work. The importer and not the exporter pay tariff payments, called duties. So any goods coming into the USA the person bringing them in pays the tax.  So when the beer disturbers brings contain a truckload of Coronita the US Beer buyers pays the tax and what does he do but passes it on to the supermarket who passes it on to the consumer. Guess what it’s not a direct pass on but an increased pass on. If the tax was a $1.00 a case by the time it gets to the supermarket it may be $1.50 a case. Each hand adds its mark-up. So we the American people will pay for the wall.

Another fall out of this plan. Will be the impact on Mexico as Coronita gets to be to expensive and people switch to an American beer, unemployment will go up in Mexico and more people will figure out a way to come to the USA to work in the American Beer factory. Do you for one minute think a wall will keep them out? They will come on a visit visa and never leave.  This will happen to a lot of industries in Mexico.

Another problem parts and factory items made in Mexico will cost 20% more so we will have new factories built here. Great you say, no I say, as these will be total automated factories with few workers if any.  In fact it will hurt the rail and trucking industry, as the haul from Mexico is now a short haul from the US factories.

Instead of a wall we need to develop more of Mexican industries so people do not want to cross the border but stay home. Wouldn’t you rather stay home?

Now we come to the even more sinister tax the Border Adjustment Tax.  This is where imports would “adjust” our tax bill by no longer allowing deductions on imports. Here is how it works, when a business buy an item to resell the cost of the item is considered an expense, and then they add the cost of doing business and expenses to get a cost of goods sold. When they sell the item the difference between the selling price and cost of good sold is their profit.  Simple business 101. Now the adjustments. Under this plan the cost of the item they import is considered zero so the profit goes up and therefore taxes go up. Let take a simple example. A shirt made overseas costs the importer, store,  $10 and the cost of selling it is $5 so the initial total cost is $15 and the store sells it for $20 thus making a profit of $5 that they report on their income taxes. They then pay income tax on the $5.00. Simple except with the adjustment tax, now the cost they can claim for the shirt drops to zero, still add the cost of selling $$5.00 but now when they sell it the profit on the books jumps to $15 and they have to pay income taxes on the $15. Now do think the business owner is going to pay the extra tax and not charge you. Lets assume the President get his tax cuts and the business tax is 15% so the tax just went from 75 cents to $2.25 or an increase of $1.50. So the storekeeper has to raise the price to $21.50, wait he now has to pay more tax on that extra $1.50 so watch the price will go to $22.00. Yes you will be paying more. Will this increase shirt production in the USA, of course not. Will it cause inflation, of course it will.  Will you buy one less shirt a year or make some last a little longer before they go to Goodwill, you bet it will.  Now think about the price of a car made overseas. Just add some zeros to my examples instead of a $20 shirt how about a $20,000 or $30,000 car or that great new TV you wanted to buy that costs $1000.00. Well maybe next year.

Just watch these tax proposals cost you a lot of money and do nothing to make America Great again in fact put America into another recession.