There are far too many false-truths surrounding the in-progress Tax Reform discussion each with the potential of further elevating the Corporate Juggernaut beyond the sacred cow status it presently holds, perhaps on to the omniscient deity domain.
This effort is by no means intended as an exhaustive narrative on the subject, choosing instead to confine the immediate discussion to two topics integral to the Tax Reform narrative. One of which states that “U.S. business tax rates make the country non-competitive on the global stage”. Look at how taxable income is calculated in the U.S. versus how it is done outside of the U.S. In many developed nations such as Germany the income partitioned to pay for mandated programs such as healthcare, pensions and vacation pay accruals occur outside of the taxable-income matrix. In China, where much of the Corporate/Commerce is either directly owned by the State or in combination with influential party affiliates and tax burdens are easily negotiated or metered thru a menagerie of quid pro quo backroom dealings and clearly not a process we should emulate.
The fact is this: The average effective corporate tax rate (U.S.) is 27.1% vs. 27.7% for the 30-remaining member-States of the OECD. The second most common false-truth is the “we’re in a global market” and the following is my response to this nonsense. The evolution of the “global market” myth, to the extent that it actually appears or exists, was created by design and not a maturation or even a natural perfecting of a process, but the deliberate result of Tax Code accommodations/carve-outs, various Trade Agreements and Financial Market-Banking Legislation that triggered the wholesale dissolution of the U.S. economic system.
Now then, with these facts in hand, how does the Trump Administrations current reform effort rank in its stated plan to Make America Great Again? Answer: Poorly! The U.S. is itself a marketplace complete with consumers, labor, natural resources, an economic infrastructure, territorial defense (Legislative System, Legal System and Military) as well as a utility infrastructure from which Entities draw upon to support its enterprises. More and more, well since the 1920’s as the U.S. Industrialized, the Individual Taxpayer (strangely enough, also the Consumer) has increasingly been forced to share more and more of the Tax Burden that funds this “marketplace” while Corporate share of Federal Tax Burden has dropped two-thirds over the last 60 years.
It is my opinion, backed by substantive analytics and void of the seemingly ever-present, unreliable and unprovable theatrics of economic sciences, that there is indeed value implicit in the U.S. Marketplace and that access to it obligates Enterprise not only to pay for it (their access), but also to seed its development and preservation; insuring this occurs is the proper and appropriate role of both Federal and State Governments.
As it is, the Corporate form has not only been given carte blanche to operate and manipulate the regulatory environment as it pleases, it is, more and more, insisting that the Federal Government invest in research and development as a resource for future product/market development in exchange for which the Government retains no economic interest (a lost government revenue source). Brilliant!
Solution: Set the Federal Corporate Tax Rate at 30%, remove all tax credits, add back (to taxable income) all Federal & State Subsidies and then provide a “tax rate reduction matrix”, in increments of 2.5% (to a maximum of 7.5%), for every Dollar of direct investment in domestic productive capacity. The incremental adjustments would be based on the Entity’s percentage “mix” of domestic components (>60%,>70% & >80%). On the Government side 20% of these proceeds will be invested in the development of a new (non-lethal) energy source (e.g., Thorium Technology) and the re-development of secure national energy grid.
Last point, the so-called “re-patriation” of Corporate fund (estimated at $3.5 Trillion) held off the shores of the U.S. is yet another illusion proffered by various talking heads. The idea of a company that has worked so effectively at storing funds outside of the U.S. would willingly and suddenly subject these funds to the tax burden of the U.S. Government is, to say the least, counterintuitive. There are numerous ways for these companies to make use of those funds, domestically or elsewhere, without having to subject them to the jurisdiction of the U.S. It’s further evidence of the ‘global market” myth whose sole purpose is to homogenize the globe into a borderless economic state with absolutely no regard for the local and unique demands of the subjugated States or their People.
The tax concept referenced above works toward circumventing the current scheme by targeting the reason and methods for how Corporations escape their domestic tax responsibilities thru the relocation of their production capacity off-shore and with it the revenues associated/attributable to those products point of sale. Yes, tax rate reductions can spur economic expansion, but if it is to be an expansion in real growth and not growth in government spending or in faux on-paper market bloat – none of which filters back into the pockets of 90% of American Households – then it will only occur with direct investment into domestic productive capacity; end of story!
The Government has, for far too long, favored the raping and pillaging of the U.S. Marketplace and the tax concept described herein is one step toward reversing this near century-long feeding frenzy.
Curtis C. Greco, Founder