Watch your wallets. Republicans are pushing a new corporate tax plan that will end up costing most of you a bundle. Here’s what you should know about the so-called “border adjustment tax." 

The U.S. imports about $2.7 trillion worth of goods a year. Many imports are cheap because labor costs are much lower in places like Southeast Asia.

Our current tax code taxes corporations on their profits. So, for example, when Wal-Mart buys t-shirts from Vietnam for $10 and sells them for $13, Wal-Mart is only taxed on that $3 of profit.

But under the new Republican tax plan, Wal-Mart would be taxed on the full price of imported items, so in this case the full $13 sale price of that t-shirt. As a result of this tax, Wall Street analysts expect retail prices in the U.S. to rise as much as 15 percent.

The plan would also cut taxes on companies that export from the United States. This is intended to encourage companies to locate production here in the United States. 

But it wouldn’t reverse the tide of automation that’s rapidly eliminating jobs even  from American factories.

The worst thing about it the plan is it’s a hidden upward redistribution.  

Its burden will fall mainly on the poor and middle class because they already spend almost all of their incomes, so they’ll feel the greatest pain from higher retail prices.

The benefits will go to companies that export and their shareholders, who will benefit from the tax cuts in the form of higher profits – and higher share prices.  Shareholders, who are mostly upper-income people, don’t need this windfall.

Republicans claim that the U.S. dollar would rise in response to higher taxes on imports, effectively wiping out the tax burden. But as a practical matter, no one knows if this will happen.

Bottom line: The tax plan is dressed up as a way to make America more competitive. But underneath it’s just a typical Republican plan that redistributes from the poor and middle class to corporations and the wealthy.

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About the Author

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock" and “The Work of Nations." His latest, "Beyond Outrage," is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Books by Robert Reich

Saving Capitalism: For the Many, Not the Few -- by Robert B. Reich

America was once celebrated for and defined by its large and prosperous middle class. Now, this middle class is shrinking, a new oligarchy is rising, and the country faces its greatest wealth disparity in eighty years. Why is the economic system that made America strong suddenly failing us, and how can it be fixed?

Click here for more info or to order this book on Amazon.

Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix it -- by Robert B. Reich

In this timely book, Robert B. Reich argues that nothing good happens in Washington unless citizens are energized and organized to make sure Washington acts in the public good. The first step is to see the big picture. Beyond Outrage connects the dots, showing why the increasing share of income and wealth going to the top has hobbled jobs and growth for everyone else, undermining our democracy; caused Americans to become increasingly cynical about public life; and turned many Americans against one another. He also explains why the proposals of the “regressive right” are dead wrong and provides a clear roadmap of what must be done instead. Here’s a plan for action for everyone who cares about the future of America.

Click here for more info or to order this book on Amazon.