The report lays out objections to the Republican plan, including an argument that cutting trillions in taxes for rich Americans, as Republicans have proposed, would increase inequality in the United States. (A separate analysis last year, by the nonpartisan Tax Policy Center, found that 99.6 percent of the savings under Ryan's plan would accrue to the wealthiest 1 percent of taxpayers.)
The authors of the Oxfam report also dispute the claim of GOP proponents that their approach would limit multinational corporations' ability to conceal their profits from federal tax authorities. Yet the report's discussion of the plan's international repercussions points to a major issue that has often been ignored in the political debate over the GOP plan, which has mostly concentrated on how the proposal would affect Americans.
Some experts say the plan would penalize foreign economies that sell products to the United States. Under the GOP plan for a border adjustment, U.S. firms would no longer be allowed to exempt the cost of their imports from taxation. On paper, this provision amounts to a new tax on imports, which would negatively affect workers around the world whose livelihoods depend on U.S. consumption.
On the other hand, many economists argue the plan would increase the price of the dollar in global exchange markets, in which case goods produced in foreign countries and sold in foreign currencies would become cheaper, making up for the tax.
If so, however, the border adjustment would put the squeeze on poor countries where corporations and governments have borrowed money in dollars rather than unreliable local currency. Those borrowers have to make payments on their loans in dollars, and those payments would be harder to make if dollars become more expensive in terms of their own currencies.
“Given that a lot of developing countries hold debt denominated in the U.S. dollar, that would essentially increase their debt burden,” said Robbie Silverman, a senior adviser at Oxfam. To make good on their debts, he added, foreign governments would have to spend more buying up dollars, leaving less money infrastructure, public health, education and other investments that can help poor countries prosper.
Foreign households, governments and businesses — excluding banks — owe a total of $10.5 trillion in loans denominated in dollars, according to the Bank for International Settlements. Of that total, emerging-market economies owe about $3.6 trillion.
Those figures dwarf the totals for other major global currencies. Debt denominated in euros totals just $2.8 trillion outside the euro area, and loans in yen amount to just $440 billion outside of Japan.
A few countries are especially vulnerable. Among large developing countries, Argentina, Turkey, Brazil and Indonesia all have outstanding debts in dollars equivalent to roughly a quarter of their gross domestic product, according to a report from Fitch, the ratings agency. Mexico and Russia are also at risk, with dollar-denominated debts worth about one sixth of GDP.
The pinch might be the sharpest in smaller countries where people rely on dollars for day-to-day banking and saving. For instance, Jamaica's government has issued debts in U.S. dollars worth nearly two-thirds of the island's GDP.
In Azerbaijan, about 80 percent of deposits are in dollars, according to Fitch. If the dollar becomes more expensive, it could be more difficult for Azerbaijani banks to pay out those deposits.
Some economists are skeptical that the dollar would become substantially more expensive under a border adjustment. Yet as William Cline of the nonpartisan Peterson Institute for International Economics in Washington noted, if the dollar does not increase, then foreign companies would be stuck paying the new tax on their sales to U.S. customers.
“My sense is that the expectations of a dollar appreciation are exaggerated,” Cline said. “It’s not exactly great news, though, for the developing countries if there’s not a big dollar appreciation.”