Obama's Corporate Tax Ploy

Barack Obama is expected to call for a reduction in the 35% corporate tax rate to a rate closer to that of other industrialized nations, probably in the high 20s.

So what is going on here? Is Obama suddenly embracing low-tax capitalism?

Well, yes, as a campaign ploy to try and attract disgruntled businesspeople and the unemployed masses to his re-election.

But actually no, not at all. He is playing the same game he always has played – all hat and no cattle. All added up, the plan offers zero tax reductions. Because he also has said that he wants to close tax loopholes for companies that “ship jobs overseas” and to impose a new tax on foreign profits earned in low-tax countries. And impose myriad new taxes on “the rich”.

The headline could have fooled you, however. ‘Exclusive: Obama to pitch lower corporate tax’ reported Reuters.

But what is the truth?

Well consider the facts. We capitalists have been calling the 35% corporate tax rate far too high for years on end. We have been calling for it to be cut dramatically, even to zero. That way corporations will move to the US – or stay here – and bring new prosperity and jobs that will more than make up for the lower tax revenues from the lower rate. In fact, like all capitalism, a lower rate will ultimately produce more revenue for the government. It works every time.

Corporations currently pay about $200 billion annually in federal taxes – about 6% of annual spending. But those taxes are not paid by corporations anyway, but by consumers. Because those taxes are “costs” that are factored into the price of the company’s products.

In a competitive world economy, a reduction in the US corporate rate to, say, 29% isn’t going to make much difference. It is just another Obama ploy. And the idea that there are “tax loopholes for companies that ship jobs overseas” is part of Obama’s far-left demagoguery that he uses to draw in the gullible Democrat voter base. Companies move overseas in the first place because there are no tax loopholes. They are taxed relentlessly by America’s Democrats. They have nowhere to hide. So they leave.

Why else do companies move?

Because of four other forces emanating from the Democrat left: Because the unions make labor unaffordable. Because environmentalists often make operating impossible with endless laws and regulations and restrictions. Because trial lawyers chase down companies over every bump and bruise and legal misstep. And because the government forces corporations to become providers of everything from health insurance to maternal leave.

America was a manufacturing colossus in the 1950s and 1960s largely because Europe and Japan were recovering from the war. In those decades the US was producing up to 50% of the world’s finished manufactured goods, according to generally accepted figures.

Today, that number is 19%. But then again the world market is much bigger, so it is not so dire as the figures make it appear. But then again the American population is much bigger too. So indeed we must get busy manufacturing more things here to keep up.

And here’s some encouraging food for thought. According to Shikha Dalmia, writing in thedaily.com and reprinted in The Wall Street Journal:

‘The fact of the matter is that even though manufacturing employment has declined – America has lost 6 million manufacturing jobs since the sector’s peak in the 1970s – manufacturing output has been going up. Indeed, total output today is 2.5 times the 1972 level in adjusted dollars. In 2010, America produced $1.8 trillion in goods (in 2005 dollars) about $100 billion more than China, but with only about a tenth as many workers, thanks to automation and technological advances that have vastly increased American productivity. Goods that took 1,000 American workers to produce in 1950 now take 177. The choice for American companies, then, is not between American workers and Chinese workers, but between American machines and Chinese workers.’

Wow. Look at those stats. No wonder we have not completely collapsed in the face of international competition or after all those job losses. Because we still have the best system in the world and the smartest and most productive people. And there still are millions of Americans who believe in the USA. And they know that productivity is the key. What we now need is a government that will unleash our Inner Monster of productivity.

Will Obama do it?

Never. He is all deceptive talk. He is dead set against American success and capitalism. He will tinker around the edge, lower the corporate rate a little, push up other taxes in retaliation, soak the rich and suck capital out of the economy while putting more and more people on the dole.

Meanwhile expectations from the Congressional Budget Office for 2013 is for only 1.1% growth. That is dismal.

So we likely will see Obama voted out in November because his ploy will not work. Because Obama-style socialism always has undermined American prosperity and more and more voters know it.

Indeed Americans realize that we can compete easily in a world economy if only we would become more capitalistic again. And if only the Democrats and Barack Obama will allow us.

Please visit my blog at www.nikitas3.com for more conservative insights. Enjoy the lively new Arts section.