These Small Business Owners Fret Over ‘Devastating’ Import Tax Pitched by House GOP Leaders

Marc Johnson (far right) is the president of Texture Technologies, a nearly 30-year-old company based in Massachusetts that exports “next to nothing” and would be taxed on its imports under a new House Republican plan. (Photo: Courtesy of Marc Johnson)

Marc Johnson runs a small business with a major footprint.

Johnson’s late father, Boine, who founded the company, and three engineers from England, helped create an instrument that measures the composition and texture of any product imaginable: baked goods, cereals, cosmetics, adhesives — to ensure they are performing well, and consistently.

Johnson imports his finished instrument from the United Kingdom, where it is produced, and sells it mostly to U.S. customers, who number more than 2,500 and include NASA, the Food and Drug Administration, Fortune 500 companies, and universities.

His nearly 30-year-old company, Texture Technologies, employs 12 people and is headquartered in Hamilton, Mass. It exports “next to nothing.” No other company sells a comparable product in the U.S., Johnson says.

As part of the most sweeping corporate tax reform plan proposed in decades, House Republican leaders aim to discourage import-intensive businesses like Johnson’s by imposing a tax on their products consumed in America, while making exported goods and services tax-free.

The plan’s authors, House Speaker Paul Ryan, R-Wis., and House Ways and Means Committee Chairman Kevin Brady, R-Texas, say their border-adjustment tax, as it’s known, would encourage companies to produce products in the U.S., and eliminate incentives for corporations to use complex schemes to shift their incomes to lower-tax countries.

But Johnson and other small businesses and retailers say the plan would raise their costs, forcing them to pass the price of that onto the consumer, and potentially cause them to lay off workers.

“If I want to keep importing and pay the tax, I am out of business,” says Johnson, 57, who estimates his federal tax bill under the House plan would soar from about $100,000 a year to $650,000 annually. “If I choose to tear down and build in the U.S., I am out of business. The whole idea of this plan is that importers like me are paying for all the exporters. Somehow, proponents think we will all be hanging around, so the government can bill us our share. But they won’t get that share because I will be out of business. That would be devastating.”

‘Entirely New System’

Supporters of the border-adjustment tax acknowledge there will be a short transition period where costs and prices might go up. But eventually, they say, things will return to normal — and be better off in the long term.

Under the plan, the corporate tax rate would fall from 35 percent — the highest such levy in the developed world — to 20 percent. Corporations would pay that 20 percent tax on their imports. At the same time, exports and other foreign sales would become tax-free.

The plan would raise money for the government in the short term — about $1 trillion over a decade, independent estimates show — to help pay for the lower tax rate.

That’s because the U.S. imports more than it exports, with an annual trade deficit of more than $500 billion.

The plan’s boosters haven’t even drafted a bill yet, but the proposal gained traction and attention after President Donald Trump last month seemed to embrace the tax on imports as a way to help pay for a border wall with Mexico. The White House later walked back that interest, saying the plan was simply “one idea” that might work to finance the wall.

Even so, some Republicans in Congress view the tax as a way to deliver the America first promise of Trump’s campaign in a way they say doesn’t resort to protectionism or risk a trade war.

“We are not cavalier about the concerns being raised, but the notion of sitting and doing nothing and not addressing fundamentally what’s at issue, which is a tax code that’s pushing manufacturing overseas, would be a lost opportunity,” said Rep. Peter Roskam, R-Ill., the chairman of the House Ways and Means Subcommittee on Tax Policy.

“So we have two choices,” Roskam told The Daily Signal in an interview. “We can do nothing, and the tax base will continue to erode, and we will wake up at some point and say what happened, why didn’t we do anything about it. Or we can go to an entirely new system that provides real growth and incentives for manufacturing in America.”

‘Don’t Kill Me’

The idea has split the business community. Major importers such as retailers — including Nike, Target, and Wal-Mart — car dealers, toy manufacturers, and oil refiners oppose the plan, warning that consumer prices will rise. Export-driven companies including General Electric, Dow Chemical, and Pfizer support the border-adjustment tax.

In interviews with The Daily Signal, Johnson, and other small business owners, said they support the premise of the plan — rewarding companies that build in America — but say shifting manufacturing here isn’t feasible for them, and would be made more difficult if they have to pay a hefty tax.

“The big picture is I know the plan wants to create incentives for me to build in the states,” Johnson says. “It’s not going to happen. I don’t have intellectual property here, or the skill set. It’s taken us 30 years to get this brilliantly produced in the way that we do. I have a beautiful line of credit. But I can’t go to the bank and say I will be in a loss position for the next seven to eight years and I want you to lend to me to build here — just to replace the revenues I am doing now. I don’t have the cash flow to wait.”

Rick Woldenberg is the CEO of Learning Resources, a third-generation family-owned company based in the Chicago suburbs that makes educational toys and employs 150 people in the U.S.

His company makes 98 percent of its products overseas, mostly in China and Taiwan.
Rick Woldenberg, CEO of Learning Resources, a family-owned company based in Illinois, worries a tax on imports would force him to raise prices. (Photo: Courtesy of Rick Woldenberg)

“American companies don’t want our business,” Woldenberg said. “Our product is very simple. It requires unskilled labor. We aren’t making a high-value item. American companies have proven they don’t want to make them.”

He said competition in the marketplace has forced him to try to “slice expenses to the bone” and find the most efficient producer overseas.

Woldenberg guessed that his federal tax rate would increase to 165 percent from 39.6 percent under the House Republican plan. He said he would have to raise prices by 10 percent to 15 percent to stay in business.

“What we are being asked to do is liquidate our company in the pockets of the government,” Woldenberg said. “They say they are trying to balance out the trade deficit, and that’s fine, but don’t kill me in the process. In trying to solve that problem, they are creating far worse inequities.”

Leveling the Playing Field

Roskam, the Republican congressman from Illinois, says he’s met with Woldenberg, and assured him and other business owners that the border-adjustment tax plan would contain “transition provisions” that phase in the tax liability that importing companies would face.

Supporters of the tax change note that other major nations impose a value-added tax — a levy imposed on domestic consumption. Compared to other countries, the U.S. has few taxes on consumption, while taxing producers more heavily. So the border-adjustment tax would level the playing field, supporters say.

“The concept of border adjustment is something every single country we compete with has,” said Brian Reardon, an advisor to the “American Made Coalition,” which supports the tax, who formerly was a special assistant to President George W. Bush for economic policy.

“All of those countries have robust retail operations and consumers are doing just fine,” Reardon told The Daily Signal in an interview. “Many of the people complaining export to those countries and pay those taxes. The idea everybody else can do it and we can’t is just nonsense.”

In addition, economists who support the plan say the dollar will rise as a result of the change, which could offset the tax increase on imports by making those same imports less expensive.

Importers such as Johnson of Texture Technologies worry that change won’t happen fast enough to offset the higher costs they’ll face.

“It’s all based on a bet,” Johnson said. “In theory, currencies will adjust and everything will be good. The whole idea that the economy will magically adjust is just people blowing smoke.”

“I am in favor of boosting exports,” Johnson added. “If the country boosts exports, then maybe more people will want to buy my product. But don’t ask the importers to pay for it. If the entire country will benefit from boosting exports, then have the entire country pay for it.”

Report by The Daily Signal's Josh Siegel.  Originally published at The Daily Signal.

Here's the Jeff Sessions photo the NAACP doesn't want you to see

Source: Twitter, @LindseyGrahamGS
Well that's awkward.

3 easy home improvement projects you can tackle right now

(BPT) - During the milder months - like summer and fall - homeowners naturally tend to prioritize working on the exterior of their houses, because the weather is nice. But in the winter, we're more apt to tackle smaller home improvement projects inside. This seems like a no brainer, right? After all, no one wants to redo landscaping when it's 35 degrees outside.

Seal out the elements

If you live in a place where heavy rain or snow are always trying to find a way into your house, know that weather can lead to serious issues in your basement or foundation. To prevent water damage and leakage stains, inspect masonry on the interior and exterior of your home. Fill any defects you find with fast-setting hydraulic cement and clean up the surface.

Once the surface is clean and dry, apply two coats of KILZ Basement & Masonry Waterproofer. This interior and exterior product is formulated for waterproofing basement walls, masonry walls, retaining walls, and cinder and concrete blocks. Once the second coat is dry, you're all set for the winter.

Start your project today

When it comes to home projects, wintertime doesn't have to mean downtime. Start your project season with any of the three ideas listed above and when warmer months roll along, you'll be ready to step out and make your home's exterior as beautiful as your interior.

With that in mind, Chip Gaines, host of HGTV's Fixer Upper and lead contractor/owner of Magnolia Homes, offers these three easy home improvement projects to help you make the most of your winter indoors.

Repaint your walls

While you're holed up inside the house decorating for the holidays or just escaping the cold, you may start noticing places on your walls in high-traffic areas with one too many scuff marks or kids' grimy handprints. Whether they come from the kids, the pets or even yourself, erasing them is quick and easy.

KILZ Hide-All primer and sealer can take care of these marks and more. This high-hiding product only needs one hour of dry time before you apply your topcoat, so there's no need to set aside a whole weekend to cross this project off your list.

Clear grout of gunk

No matter how much cleaning Gaines does at his house, he says there's one thing that's hard to keep looking clean: grout. The dirt and grime that turns your grout nasty colors can be scrubbed out, but it takes a little extra TLC. Gaines says he actually enjoys this project and finds it kind of fun because his boys like to join in and help, making it a family affair.

To clean grout at your home, he recommends wiping the surface with a wet cloth and mixing up a paste of two-parts baking soda and one-part water. Scrub it onto the grout surface using an old toothbrush or stiff-bristled brush, then rinse the area with water. If your grout lines are stained from mildew or kitchen spills, try spraying a mixture of equal parts vinegar and warm water onto the tile. It'll foam for a bit, but once it's done, scrub it well. After a final rinse, the stains should be gone.

Pension plan funding shortfalls threaten retirees in all 50 states

(BPT) - Everyone knows it is important to save for retirement in order to build a nest egg and enjoy the "golden years." So why is it that state and local governments many times act irresponsibly when it comes to saving for the future of public employees?

Government pensions are the way in which state and local public employees like teachers, police officers and firefighters receive retirement benefits. Typically both the employee and the government set aside money each year to be invested. The investments will hopefully grow over time, and both the annual contributions and the investment growth is understood to form the pool of money public employees will be able to use once they reach retirement. That's the theory.

Unfortunately, according to Unaccountable and Unaffordable 2016, a new, state-by state analysis from the American Legislative Exchange Council (ALEC), government pensions are being massively underfunded across the states, and now hardworking taxpayers are on the hook. What is the price tag? Across the 50 states, unfunded pension obligations now total $5.6 trillion. Now, that number sounds large at a national scale, but what does it mean for the average American? To be exact, this state pension debt equates to an average price tag of $17,427 for every man, woman and child in the United States.

There are numerous reasons why pension liabilities are so large. For one, the stock market is not growing as quickly as many assumed it would, exiting the recent economic downturn. Therefore, investments for many pension funds are not meeting expectations. The average pension fund assumes they will earn a whopping 7.37 percent on their investments over the long term. These overly-optimistic assumptions fly in the face of what many financial experts are calling a "new normal" of lower than expected investment earnings in the future.

Another inconvenient truth is that many state governments have failed to deposit the annually required contributions into pension funds every year. The urge to spend more money on other government projects, however well intentioned, has diverted much-needed contributions away from pensions and has contributed significantly to unfunded liabilities.

When pensions are unstable, millions of Americans are faced with an uncertain retirement. However, this is not only a problem for government workers - it affects all Americans. Without a sustainable solution to underfunded pensions, higher taxes will be the reality for all hardworking taxpayers.

What's more, an increasing percentage of state budgets are being drained to pay pension benefits, with less money available for important functions like funding public schools and fixing roads. One especially sobering story comes from Illinois, where since 2009, this trend is so extreme that 89 cents out of every new dollar of education spending has gone to teacher pensions, leaving just 11 cents for salaries, textbooks, building costs and the various in-classroom costs of education. And by 2025, Illinois will spend more on teacher-retirement costs than it will spend on the classroom.

Pension funding is not a Republican vs. Democrat issue. It's a retirement issue that affects all Americans. Unfunded pension liabilities will be harmful to the future of workers, retirees and taxpayers alike, if forward-thinking policymakers do not tackle pension reform in a timely fashion.

To find out more about how prepared your state is and to see the full report, Unaccountable and Unaffordable 2016, is available at

VIDEO: Mitch McConnell shuts down Elizabeth Warren

To paraphrase Leona Helmsley, Elizabeth Warren believes rules are for the little people.

The Racist Roots of Minimum Wage Laws

There is little question in most academic research that increases in the minimum wage lead to increases in unemployment.

The debatable issue is the magnitude of the increase.

An issue not often included in minimum wage debates is the substitution effects of minimum wage increases. The substitution effect might explain why Business for a Fair Minimum Wage, a national network of business owners and executives, argues for higher minimum wages.

Let’s look at substitution effects in general.

When the price of anything rises, people seek substitutes and measures to economize. When gasoline prices rise, people seek to economize on the usage of gas by buying smaller cars.

If the price of sugar rises, people seek cheaper sugar substitutes. If prices of goods in one store rise, people search for other stores.

This last example helps explain why some businessmen support higher minimum wages. If they could impose higher labor costs on their less efficient competition, it might help drive them out of business.

That would enable firms that survive to charge higher prices and earn greater profits.

There’s a more insidious substitution effect of higher minimum wages. You see it by putting yourself in the place of a businessman who has to pay at least the minimum wage to anyone he hires.

Say that you are hiring typists. There are some who can type 40 words per minute and others, equal in every other respect, who can type 80 words per minute.

Whom would you hire?

I’m guessing you’d hire the more highly skilled. Thus, one effect of the minimum wage is discrimination against the employment of lower-skilled workers.

In some places, the minimum wage is $15 an hour. But if a lower-skilled worker could offer to work for, say, $8 an hour, you might hire him.

In addition to discrimination against lower-skilled workers, the minimum wage denies them the chance of sharpening their skills and ultimately earning higher wages. The most effective form of training for most of us is on-the-job training.

An even more insidious substitution effect of minimum wages can be seen from a few quotations.

During South Africa’s apartheid era, racist unions, which would never accept a black member, were the major supporters of minimum wages for blacks.

In 1925, the South African Economic and Wage Commission said, “The method would be to fix a minimum rate for an occupation or craft so high that no native would be likely to be employed.”

Gert Beetge, secretary of the racist Building Workers’ Union, complained, “There is no job reservation left in the building industry, and in the circumstances, I support the rate for the job (minimum wage) as the second-best way of protecting our white artisans.”

“Equal pay for equal work” became the rallying slogan of the South African white labor movement. These laborers knew that if employers were forced to pay black workers the same wages as white workers, there’d be reduced incentive to hire blacks.

South Africans were not alone in their minimum wage conspiracy against blacks. After a bitter 1909 strike by the Brotherhood of Locomotive Firemen and Enginemen in the U.S., an arbitration board decreed that blacks and whites were to be paid equal wages.

Union members expressed their delight, saying, “If this course of action is followed by the company and the incentive for employing the Negro thus removed, the strike will not have been in vain.”

Our nation’s first minimum wage law, the Davis-Bacon Act of 1931, had racist motivation.

During its legislative debate, its congressional supporters made such statements as, “That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.”

During hearings, American Federation of Labor President William Green complained, “Colored labor is being sought to demoralize wage rates.”

Today’s stated intentions behind the support of minimum wages are nothing like yesteryear’s. However, intentions are irrelevant. In the name of decency, we must examine the effects.

Commentary by Walter E. Williams.  Originally published at The Daily Signal.