Results from my Twitter poll on the legislative prospects of the DBCFT

January 12th, 2017 at 3:47 pm

My statistics professors would legitimately disown me for posting these results from a Twitter poll I ran yesterday on respondents’ guesses re the likelihood that the R’s corporate tax replacement–the destination based cash flow tax (DBCFT)–becomes law.

A “convenience sample,” a sampling framework that makes no attempt at representativeness, is the worst kind of sample, and you can’t trust the results it yields. Suppose I sampled people right outside of a pot shop asking them what they thought of marijuana legalization.

But I will very weakly and limply defend this sample a bit. You can’t randomly sample folks on an obscure topic like this, and the #DBCFT community is a…thing…sort of, that exists in the Twitterverse. You might not want to hang out much with us, but “we’re here, we’re weird, and we’re not going away!”

Anyway, as you can see, slightly more than half of respondents give the tax a low probability of passage.

Source: Twitter

The non-deductibility of imports is a strike against the DBCFT for businesses that a) have significant imported inputs, and b) don’t believe the story about the tax driving an exchange rate adjustment large enough to fully offset the tax (i.e., the value of the dollar goes up enough relative to the currency of foreign suppliers that the lower dollar cost of imports offsets the new tax burden). These businesses have lobbyists, as do the US investors with foreign holdings that would become less valuable in dollar terms when the greenback appreciates. (Note that the businesses oppose because they don’t believe the appreciation story; the investors oppose because they do!)

Still, these results are a bit more optimistic re passage than I would have guessed. Of course, such guesses would surely become more optimistic if team Trump were to embrace the change, which, to my knowledge, they have not.

OK, my bad for already saying too much based on such a non-representative sample.

A few other DBCFT docs just out:

–Here’s a useful, and pretty favorable, Bill Gale take. He says: “The corporate tax is ripe for reform [Tru dat! JB]. The DBCFT is an excellent way to kick-start the needed discussion.”

I found this point of Bill’s to be particularly resonant: “4)  However, precisely because the DBCFT does not have the negative incentive effects of the corporate income tax, there is no good reason to reduce the tax rate to 25/20 percent.  Indeed, the tax rate should be equal to the top rate on individual income, so as to reduce incentives to reclassify wage income as business income.”

Of course, as I’ve stressed, the higher the rate, the larger the $ adjustment needs to occur to offset, so if you’re already skeptical about that…

–Here are results from a national poll by the US Consumer Coalition wherein they ask a number of questions about the DBCFT. Definitely interesting, but I’m hard-pressed to imagine how those who haven’t closely followed this debate have much of an informed opinion, meaning these results must be highly sensitive to the wording of the questions.

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One comment in reply to "Results from my Twitter poll on the legislative prospects of the DBCFT"

  1. Kevin Rica says:

    In a flexible exchange rate system, the only way to reduce the deficit on current account is to reduce inflows on the financial (née capital) account. Not even massive tariff work under flex rates. Tariffs and DBCFTs will, as mentioned above, just cause offsetting exchange rate movements.

    But Nancy Pelosi and the California congressional delegation will probably support Trump on this one because they can’t be seen lagging in their support of DBCFT rights.


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