THE TAX CUT AMERICA CAN’T DO WITHOUT
September 13, 2017
There is a point of diminishing returns on a nation that over taxes its citizens. Pray for a fair and equitable tax policy to be developed in the coming months.
“This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing.” (Rom. 13:6)
How much should corporations pay in taxes?….
The late congressman and Department of Housing and Urban Development Secretary Jack Kemp, who was a major figure in U.S. economic policy from the 1970s to the 1990s, never tired of telling audiences of blue-collar workers that “you cannot love the employee and hate the employer.” Jack (as everyone called him), a former professional football quarterback, ironically became the greatest salesman for Reaganomics. He was a man of enormous physical and mental energy, who read deeply in economics and then preached the gospel of economic growth as no one did before or after.
He would ask his audiences: “How many truck drivers would you hire if there were no trucks?”
Jack Kemp’s parents owned a small trucking company and, as a boy, he saw how hard they worked and saved to build their company. When they accumulated enough money, they would buy another truck and then hire someone to drive it. The truck manufacturer created more jobs to build the trucks for the Kemp family and thousands of others.
Whether it is a small family trucking company or a giant corporation, the process is the same. The company needs to acquire the funds in order to acquire the machinery and hire the workers to operate them. The more savings and investment is taxed, the less capital formation, resulting in lower productivity, economic growth and job creation.
The U.S. corporate income tax rate is comprised of a federal rate of 35 percent and an average of 5 percent for the states, giving an average 40 percent rate. The corporate tax has long been recognized by economists as one of the worst taxes. Despite all of the talk about “greedy corporations,” corporations are merely a way of doing business. The corporation does not “pay” the tax, only individuals pay taxes — so the corporate tax is passed along to consumers in terms of higher prices, to the stockholders in terms of lower dividends and capital gains, and to the workers in terms of lower wages. Recent studies have shown that most of the corporate tax falls on the workers. Consumers resist higher prices and can often buy similar goods and services from foreign producers where the tax rate is lower. Investors have many options — both in form and location, including the entire globe — as to where to put their money. The worker has fewer options and hence suffers most from the corporate tax….
President Trump has presented several very sound principles for tax reform. Yet, without the details being presented, the tax reform effort is already being attacked by the Democratic leadership….
Some who only view the world in static terms say we cannot afford a corporate tax rate cut. Our relative economic pie is getting smaller compared to the rest of the world. Without cutting our noncompetitive corporate tax rate, businesses will continue to move to the rest of the world, leaving fewer jobs for Americans and less to tax…. (Excerpts from Richard w. Rahn’s article in The Washington Times – Richard W. Rahn is chairman of Improbable Success Productions and on the board of the American Council for Capital Formation.)