Around 1 a.m. last Tuesday, I found myself at a mailbox somewhere near my apartment, tax forms in hand. Among the thoughts circulating through my head was concern that I had misreported my financial information — assuming its even possible to misreport annual earnings as humble as mine — as well as worries about whether I had just dropped my return forms into some defunct mailbox (despite the fact I've never been victimized by faulty postal service, I can never really feel comfortable) and anxiety over when I could expect Uncle Sam to toss back the several hundred dollars I'd lent him throughout the year.
Eventually, however, I also began to think about the complicated collection formulas employed by the Internal Revenue Service at the behest of policy makers. Because of the rush at tax time, there is often little room to reflect. Having simply considered the complexity of even a personal income tax form, it becomes apparent the extent to which creativity can be applied in devising a revenue-gathering scheme. And in this modern era of perpetual U.S. budget woes, a little bit of creativity could go a long way.
Interwoven into a quilt of economic pacts and free trade agreements with foreign countries, the United States has long been unable to impose taxes on various imported goods and services. This, of course, works to ensure that our counterparts also lack such a freedom and that trade between the parties in agreement can occur unimpeded. Therefore, in the simple world of hypothetical economics, no country can unfairly hold a competitive advantage over any other with which it has entered a free trade agreement.
But free trade and globalization in reality are a far cry from the theories used to explain them in textbooks.
Although its current leadership has kept the United States largely on the straight and narrow in terms of the country's compliance with trade pacts, other countries involved in these pacts have not acted accordingly. Often, overseers of free trade agreements will voice complaints over things such as high farm subsidies in France, unfair currency practices in China or generally veiled protectionism in Japan. Yet these practices, and many similar ones, are ongoing and continue to provide major economic advantages to the countries that use them.
So why isn't the exploitation of trade pact loopholes more of an option in the United States? After all, what is the harm in temporarily gaining revenue from a glitch in a trade agreement if such is common practice in other countries?
There are many conceivable measures the United States could take to gain additional revenue without exclusively penalizing its own economy.
Consider the idea of taxing companies officially based in the United States but whose operations are completely global. For instance, say the U.S. government imposed a $300 per restaurant fee to be paid by every McDonald's restaurant (and lawmakers could certainly concoct language clever enough to create such a specific tax). Obviously, these restaurants, however begrudgingly, would simply pay the fee, as it would be relatively insignificant to them. And the burden passed on to consumers would be spread out on a global level. Therefore, while U.S. consumers might see the price of a Big Mac rise by 1 cent, so would the rest of the world. But U.S. consumers, unlike their counterparts, would have profited from the revenue generated by the tax.
Although this is only one example of how an individual government can temporarily exploit globalization for its own advantages, there are many others. Because so many U.S. firms can now be considered entirely global in operations, the possibilities of huge financial gains accompanied by minimal detriment to the domestic economy are vast.
It is about time U.S. leaders re-examine the language of the country's free trade agreements. In our current financial condition, every option of revenue collection must be considered.
Rob Rossmeissl ([email protected]) is a senior majoring in journalism and political science.