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Fox
News Best of Opinion...
Do the Math -- Lower
Corporate Tax Rates = More Jobs, Growing Economy
By Rodney P. Mock
April 08, 2011
The good news came in March. The February unemployment rate dipped
slightly below 9 percent to 8.9 percent, according to the U.S. Bureau
of Labor Statistics, with nonfarm payroll increasing by 192,000 jobs.
But before we pop the Champagne and toot our patriotic Made-in-China
horns we need to keep in mind that until this latest miniscule
decrease, the unemployment rate had held over 9 percent for a
staggering 21 consecutive months.
Not only that but the unemployment rate among blacks and Hispanics
continues to be north of 10 percent; the jobless rate among our teenage
youth also remains at a jaw-dropping 23.9 percent; and more than ever
college graduates are returning home unemployed and crippled with
mortgage size student loan debts.
Even with the lower February unemployment figure, at some point our
employment rate will clearly reach a glass ceiling as the number of
jobs fleeing overseas continues to rise, with more and more U.S.
corporations, particularly in the technology and pharmaceutical
industries, setting up shop in friendly-tax countries like Ireland,
Switzerland and Bermuda.
If the U.S. is ever going to emerge from this economic abyss, if our
government is truly serious about stimulating growth and significantly
cutting the unemployment rate, the federal income tax rate on American
corporations must come down so that we can create a sustainable
economy again.
Indeed, at 35 percent, our country has one of the highest statutory
corporate tax rates in the industrialized world. This rate increases
even higher to an astonishing 40 percent when including the state and
local taxes typically paid by corporations. In contrast, countries such
as Ireland, Switzerland, and Bermuda have corporate tax rates of 12.5
percent, 8.5 percent, and 0 percent, respectively.
Moreover, a recent report by The Cato Institute estimates the United
States also has the highest effective tax rate on new investment 34.6
percent among all countries in the Organization for Economic
Cooperation and Development. While other countries are lowering their
rates to compete, ours have remained steadfast and for no particular
reason. The average OECD effective tax rate on new investment was 18.6
percent.
In his State of the Union address, President Obama acknowledged that
American corporations were faced with a seemingly insurmountable
competitive disadvantage given the corporate tax rates. Of particular
note, there are millions of corporations stuck doing business in
America, unable to use the various tax loopholes entailed with
conducting business offshore. In Mr. Obama’s own words, this “makes no
sense,” and “has to change.”
That change will only come by lowering the rates, which will spur
significant economic development, bring our American jobs back to our
shores, let the part-time employees become full-time, let the
discouraged workers become encouraged, and let the unemployed become
employed.
And the government should be salivating at this prospect. As it stands
now, the percentage of federal revenue generated from U.S. corporations
has been significantly decreasing over the last half a century thanks
to the incredibly high rates.
Meanwhile, the financial burden of revenue generation has been pushed
off almost exclusively onto the individual income taxpayers. And with
apologies to the Bard, William Shakespeare, “there’s the rub.” Indeed,
more than one-third of American individual tax filers – a full 36
percent, to be exact - pay absolutely nothing into the system, except
for Social Security and Medicare. And far too often, these non-tax
payers even receive money back on April 15th.
In 1960, individual income taxes comprised 44 percent of all federal
revenue sources. If you included Social Security taxes, it zoomed up to
60 percent. In comparison, revenue from corporations at the time was 23
percent.
Fast forward to 1994, when individuals were paying 43 percent of all
federal revenue, and when combined with Social Security the number
nearly doubled to 80 percent.
Meanwhile, corporations paid only 11 percent of all revenue. And now to
the more recent present. In 2009, the number for individuals was 44
percent and when Social Security was included it reached a staggering
86 percent. Corporations on the other hand, paid only an anemic seven
percent of all revenue.
This ridiculous number is directly correlated to the grossly high
corporate tax structure. So, it should come as no surprise that for
many years now American corporations have been packing up their bags
and shifting their profits and jobs overseas to jurisdictions with
lower taxes. It is only those unfortunate corporations stuck here that
end up footing the cumbersome Made-in-America tax bill.
The multinational corporations that do set up shop overseas use a
series of sophisticated and perfectly legal loopholes in the Internal
Revenue Code to avoid paying taxes in the United States, while their
earnings stock pile overseas in their foreign subsidiaries. (The total
amount of money U.S. companies have trapped overseas is $1.2 trillion).
And, in what can only be described as the ultimate in “chutzpah,” it is
these same corporations that will then aggressively lobby members of
Congress for such legislation as The American Jobs Creation Act of
2004, where corporate foreign earnings were repatriated back into the
U.S. almost entirely tax-free.
So where exactly do we go from here? The only solution is lowering the
rates to create a more permanent and competitive tax structure for U.S.
corporations so they can effectively compete. In an op-ed published
last year in the Wall Street Journal, Cisco Systems Inc. Chief
Executive John Chambers and Oracle Corp. President Safra Catz argued
that temporarily reducing the rate on overseas earnings from 35 percent
to 5 percent would generate as much as $50 billion in tax revenues.
At the moment, under our current system, while Americans may be the
society of “great innovators,” when that next rocket ship is created
and sold at Best Buy on the weekend, it will mostly likely be developed
and manufactured overseas, where the jobs are cheap, the sun is
shining, and the profits remain untouched from the grasp of scraggly
old Uncle Sam.
Read it at Fox News
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