Tag Archives: Economics

News

Michele Bachmann explains why we need to cut corporate tax rates

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Representative Michele Bachmann
Representative Michele Bachmann

Michele Bachmann is by far my favorite House Representative. In a post dated 2/17/2009, she draws attention to the little-known fact that the combined corporate tax rate of the United States is the fourth highest in the world. This is important because the higher to corporate tax rate, the more likely it is that a corporation will move overseas and lay off all of its American workers. Also, a lower corporate tax rate attracts the best and brightest from abroad to move here to start their businesses, powered by American workers.

This might come as a surprise to you, but the United States is near the top of the list of industrialized countries with the highest corporate tax rates.

You may be asking yourself “so what,” or “who cares,” but it’s important to recognize that lower corporate tax rates result in attracting more investment capital. A reduction of the federal corporate tax rate would increase firms’ productivity and investment incentives, and ultimately stimulate our nation’s long-term competitiveness by enhancing economic freedom.  The end result would be a boon to your family budget.

The problem gets even worse when you realize that many eastern European nations are slashing their corporate tax rates and even imposing flat taxes, leading to astonishing economic growth. This growth attracts foreign investments away from the USA, because investors can get a better return wherever there are lower corporate tax rates.

Bachmann post cites a study from KPMG showing just how bad the USA is compared to other nations.

“U.S. corporate income tax rate is higher than all other global regions—14 percentage points higher than the global average and nearly 17 percentage points higher than the average among European Union nations. Of the 106 countries surveyed, only the United Arab Emirates, Kuwait, and Japan impose a higher corporate tax rate than the combined rate of 40 percent. The United Arab Emirates and Kuwait each have a staggering tax rate of 55 percent; Japan’s rate is 40.69 percent.”

She also cites alarming figures from Heritage Foundation.

“Even Europe’s old welfare states have joined the aggressive tax cut parade: Sweden has cut its corporate tax rate to 28 percent from 60 percent; Norway’s rate has dropped over 50 percent to 28 percent; and Denmark’s corporate tax rate is now 25 percent.”

Is it any wonder that American firms are laying off workers and shipping jobs overseas? Cutting corporate tax rates creates jobs, increases economic growth and, eventually, increases consumer spending. If you don’t believe me, believe the 69-page research paper published by the Congressional Budget Office. The Tax Foundation summarizes their findings here.

A new study from three prominent economists finds that employees suffer most when their corporate employers must pay high corporate taxes. That contradicts the theory that has prevailed for decades — that corporate taxes mainly hurt investors — but it supports a recent CBO study by Randolph that found workers bearing 70 percent of the burden of corporate income taxes.

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They find that the workers’ share of the corporate tax burden ranges from 45 to 75 percent.

The Tax Foundation has a complete study of corporate tax rates across the world. We are not winning. We are losing. Badly.

On a positive note, I find it charming and delightful when women speak passionately about how fiscal conservatism supports marriage, family and charity. Bachmann and her husband Markus run their own business. She’s worked as a tax lawyer and an elected legislator, but she still found time for a period of home-schooling. And not only did she raise her own 5 children, but also 23 foster children.

In her speech at the Republican National Convention in 2008, (video, transcript), Bachmann makes the connection between fiscal conservatism, small government, a strong family and private charity.

As Republicans, we recognize that service is an innately personal characteristic. It is best achieved by individuals and community groups, faith-based organizations and charities. And, service thrives best in an environment of freedom. Government fosters service best when government binds it least.

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As Republicans, we recognize that when you keep more of your hard-earned dollars, you are free to spend it as you choose on the charities that touch your heart and make a difference in your community.

Bachmann believes in marriage, family and charity. My favorite quote from her is from her profile in World Magazine.

Bachmann says for her one thread ties all the day’s obligations together: “radical abandonment to God’s call.”

For more on big-government socialism and its conflict with marriage, family and charity, see this video lecture, by the eminent economist Jennifer Roback Morse.

News

Porkulus bill reverses welfare reform and nationalizes health care

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This post is just a quick summary of what the spendulus bill actually does. The Heritage Foundation notes that the bill reverses welfare reform, threatens religious liberty and effectively federalizes health care.

Against the recommendations of the Congressional Budget Office, he will sign this bill. Despite returning the nation to a sea of dependency by completely reversing President Clinton’s welfare reform in 1996, he will sign this bill. Despite the threat to religious freedom cleverly disguised in the small print, he will sign this bill. Standing steps from the federal agencies he plans on doubling in size through cherry-picked liberal programs, he will sign this bill. Using an economic emergency to shield the liberal goal of federalizing your health care, he will sign this bill. And despite the overwhelming majority of Americans in poll after poll saying ‘no’ to this bill, he will say ‘yes’.

The National Review has more on the reversal of the welfare reform, which was passed by Newt Gingrich and signed by Clinton. Porkulus actually makes the welfare problem worse than before 1996.

Under the provisions in the stimulus bill, states will once again be paid a bounty for expanding their welfare rolls. As reported by Robert Rector of the Heritage Foundation, the federal government will now pay states 80 percent of the cost for each new family they sign up for welfare. That means that states will get $4 for every $1 they spend. This will leave the main welfare program, Temporary Assistance to Needy Families (TANF), with a funding mechanism similar to the one that supports Medicaid. As Brian Blase argues here, Medicaid’s funding ratio, which gives states $1 to $3 for every dollar they spend, has caused state Medicaid spending to skyrocket. If Medicaid’s dollar-for-dollar model has proved ruinous, Obama’s new $4-to-$1 ratio for welfare will prove, in all likelihood, four times so.

The Cato Institute’s blog explains how porkulus will balloon the budget deficit, and also how it is full of pork. According to the Tax Foundation’s Joseph Henchman, only about 24% of the bill is “tax cuts”, and not the good kind. Arnold Kling, speaking at a Heritage Foundation/Club for Growth event, argues that the right thing to do would have been to cut payroll taxes. Cutting payroll taxes would stimulate the economy. The Competitive Enterprise Institute notes that Cato assembled 200 economists who opposed the Generational Theft Act. CEI also notes that our current national debt is 11 trillion and that we owe 451 billion in interest per year, before porkulus even passes.

CNS News reports that the Generational Theft Act was passed without a single Republican or Democrat in the House or Senate reading it.

Sen. Frank Lautenberg (D-N.J.) predicted on Thursday that none of his Senate colleagues would “have the chance” to read the entire final version of the $790-billion stimulus bill before the bill comes up for a final vote in Congress.

“No, I don’t think anyone will have the chance to [read the entire bill],” Lautenberg told CNSNews.com.

Or, if you like video, you can see John Boehner’s disgust with the hiddenness of spendulus here. So much for “transparency”. The Democrats also broke their promise to allow the public to see the final version of the bill for 48 hours, before it was voted on. I highly recommend watching this 1 minute clip. At least the Republicans in the House did not provide cover to Obama. He will own the mess he created. Too bad the Democrats aren’t owning Clinton’s Community Reinvestment Act, which caused a lot of this sub-prime lending mess in the first place.

For details on what pork is actually in the porkulus bill, check out Tom Coburn’s list. (This may not reflect the last minute copy from Friday).

Videos

New RNC chairman Michael Steele debates the porkulus on Fox News

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We have a new chairman of the Republican National Committee, former lieutenant-governor of Maryland, Michael Steele.

Steele’s first action on taking command of the Republican party was to clean house. In this clip, he goes toe to toe with DNC chairman Tim Kaine on the porkulus package. Boy, is it great to have someone who understands fiscal conservatism and can actually talk about it.

Economist Tom Sowell explains in this piece why Steele is a great choice for conservatives and libertarians.

Steele not only knows how to talk, he seems to understand the need to talk. In his appearances on television over the years, he has been assertive rather than apologetic. When attacked, he has counter-attacked, not whined defensively, like too many other Republicans. And when criticizing the current administration, Steele won’t have to pull his punches when going after Barack Obama, for fear of being called a racist.

For details on what is actually in the porkulus bill, check out Tom Coburn’s list.

Here are my favorites:

  • $39 billion slush fund for “state fiscal stabilization” bailout
  • $5.5 billion for making federal buildings “green” (including $448 million for DHS HQ)
  • $1.3 billion for NASA (including $450 million for “science” at NASA)
  • $1.5 billion for carbon capture projects under sec. 703 of P.L. 110-140 (though section only authorizes $1 billion for five years)
  • $850 million for Amtrak

Do Democrats even care about history? Stimulus packages did not work for FDR in the 1930s, or for Japan in the 1990s. Not only that, but Michelle Malkin is reporting that the porkulus bill contains a mechanism to nationalize health care. I already blogged in detail about how well nationalized health care works in the UK and Canada.

UPDATE: Here is an article that an atheist Obama supporter sent me that shows why the porkulus is such a bad idea. Needless to say, he is shocked – shocked – that Obama is doing exactly what he said he would do during the campaign. Porkulus!

UPDATE 2: Economist Walter Williams argues that not only will porkulus drive us into a depression, but that it is also unconstitutional. Here is economist Tom Sowell’s take on porkulus, “Using long, drawn-out processes to put money into circulation to meet an emergency is like mailing a letter to the fire department to tell them that your house is on fire.” Paul over at triablogue laments that we have not reached the day where we give equal credence to the conclusions of eminent black economists, like Williams and Sowell, in Washington.