01/10/2017

Nice Little Company Ya Got There. Shame If Anything Happened To It.

A. Barton Hinkle, Reason

Donald Trump puts the squeeze on companies looking to outsource.

On Tuesday, il Duce resorted again to Twitter, the medium best suited to the depth of his thought, to slam another U.S. company. This time it was General Motors.

"General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border," he tweeted. "Make in U.S.A. or pay big border tax!"

The response from GM was, unfortunately, printable: The company pointed out that it makes all of its Cruze sedans in Lordstown, Ohio, and makes a hatchback version for international markets in Mexico. Some of the latter are sold in the U.S.

For that heinous crime, Trump wants to make American car buyers pay more. That'll show 'em.

This is an odd stance for a man whose own businesses also sell products made in Mexico—not to mention China, South Korea, Indonesia, Vietnam, Bangladesh, Honduras, Germany, the Netherlands, India, Turkey, and Slovenia. You'd think someone who does so much outsourcing would be more sympathetic to the practice.

Nope. Last month, Trump blasted bearings-maker Rexnord for a planned move to Mexico. Before that, he famously intervened in Carrier's plans, arranging for $7 million in state tax breaks to keep jobs at a company plant in Indiana. He has threatened to impose a 35 percent tariff on "companies wanting to sell their cars, A.C. units, etc. back across the border."

"Companies are not going to leave the United States anymore without consequences," Maximum Leader has warned. Indeed: Trump's tweets not only cause P.R. headaches, they also drive down stock prices—as Rexnord and GM quickly found out.

The browbeating seems to be working. Last week Ford announced that it would scrap plans for a new plant in Mexico. Instead, it will invest $700 million in Michigan and create 700 jobs. CEO Mark Fields said the move was not the result of any deal with Trump but rather a "vote of confidence" in the pro-business environment he is creating.

Sure it is. And the protection money a florist pays to the mafia is a vote of confidence in the security environment it creates, too.

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Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).

 

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