Kent Cravens
It sounded really good on the campaign trail, the talk about leveling the “playing field” and cracking down on companies that “ship jobs overseas.”
But as the details emerge on the administration’s tax proposal, two things become clear.
First, the proposal is not about fairness so much as it is about raising revenue. Second, under this revenue grab, we will watch jobs and prosperity simply wither away rather than go abroad.
If you think our economy cannot really do much in the way of shrinking, just wait until they pass this tax “fairness” legislation.
The massive stimulus bill was supposed to cut unemployment and turn our economy around. But even here in New Mexico, we are feeling the effects as our unemployment heads to double digits.
And nationally, the revenue for Uncle Sam this year was fully a third less this past April than in April of 2008.
So the rest of this administration’s ambitious program changes — such as nationalizing health care — are up against the ropes unless they can find big chunks of easy money to pay for them, and fast.
In most of the developed world, a company that makes some of its money in another country pays taxes on the profits in the country where the profit was actually made. Here in the United States, however, we also tax what’s left of those profits when they come back to the United States, if not before.
But at least we have always given companies an allowance for the taxes they already paid abroad. Under the new proposal, however, even that allowance goes away. Talk about a disincentive to be an American-based company, or a competitive disadvantage for any company that toughs it out and tries to stay based in the U.S. of A.
Taxing the customers of those businesses
With tax laws and regulations as tough as they are in this country, we have already put some of our great 20th century giants, such as Ford, GM and Chrysler, into the toilet. There isn’t a single country in Europe any longer that taxes their companies at a rate as high as we do in the United States.
It is also something of a mystery to me that nobody in this country makes the connection between taxing business and taxing the customers of that business. Really, they are one in the same.
Let’s think about this for a minute. If a company is not profitable, what happens to it is that it goes out of business. If a company is highly profitable, by contrast, it attracts new competitors.
When we tax these enterprises in a free market, we the consumers end up paying the tax in the form of higher prices.
Either that, or the company goes out of business and the door is left open for foreign businesses in their lower-tax and less-regulated home countries to move in and fill the void.
Even Japan, the last of the developed countries other than the United States to tax their companies’ foreign profits, is moving away from the practice. Yet in the United States, we are out to make the practice all the more onerous.
Call your elected officials
It is one definition of insanity to keep doing the same thing repeatedly and yet expecting different results. But that is exactly what we are doing if we attempt to tax our way out of a deep recession.
Had the administration’s stimulus package been more about bricks and mortar infrastructure spending, and less about non-productive expenditures such as shoring up state Medicaid spending, we might have a rebounding economy. The big spenders in Washington would then have some extra money coming in and might be able to make good on some of their tall campaign season promises.
But they didn’t jumpstart the economy, and now, in political suicide mode, they propose to drive us into the economic abyss.
Nobody who cares about our economic future should sit this one out. Let Sens. Bingaman and Udall know it’s time to put the brakes on the big spending. Make job creating companies like Intel, Conoco Philips, Johnson & Johnson, General Electric, Caterpillar, National Gypsum, US Steel, Whirlpool and others more competitive, not less so.
Each of these companies, along with 192 others, recently sent a letter to the Senate Majority Leader Harry Reid and Speaker of the House Nancy Pelosi asking them to protect the 22 million American jobs represented by these companies.
Congressman Teague needs to hear from us too, because Pelosi has promised the administration they’ll have their deals cut and their “fix” to the president this current session.
If you care at all about the future of our economy, or jobs, our freedom, you’ll pick up the phone and give our elected officials a ring right now.
Cravens is a Republican state senator from Albuquerque. He authored this commentary on behalf of the group Promote American’s Competitive Edge.