American Elephants


Unleashing the Power of American Freedom and Innovation by The Elephant's Child

It wasn’t that long ago that Democrats and the mainstream media (but I repeat myself) were moaning about how businesses were hoarding cash and buying back stock instead of investing. The talking points were all about “Corporate Greed.” Bernie Sanders was all about “trickle-down economics,” a dumb slur that goes back to 1981 and the Reagan Revolution that lowered taxes for everyone, but particularly for corporations that, like today’s, were the highest in the world, and real brakes on the economy. Reagan lowered corporate taxes dramatically and set off a 20 year boom.

Democrats are sure that corporations are evil entities that prey on the people by trying to make a profit. If they weren’t so greedy, then everything would be more affordable, and the people would be happier. If you can’t make a Democrat understand that if corporations do not make a profit, they cease to exist—you’re not going to make much headway with the Trump Revolution.

Once again, American corporate taxes are the highest in the world, and it really harms their ability to compete. Add to that the over-regulation of the Obama administration, and you have the explanation for why the Trump tax cuts and reversal of unneeded regulation has corporations poised to expand and invest with a vengeance. AT&T will increase its U.S, investments next year by $1 billion, pay a $1,000 bonus to some 200,000 employees. Comcast, explicitly citing tax reform and the FCC decision to end net-neutrality, pledged a $1,000 bonus to about 100,000 employees and vowed to invest “well in excess” of $50 billion over five years.

Boeing said the new law “boosts Boeing’s competitiveness” and will move up an additional $300 million of investments, dedicating $100 million to corporate giving; $100 million for worker development; and $100 million to enhance the company’s facilities.

Why are corporations giving bonuses or raising pay levels? Because we are already reaching very low levels of unemployment as business expands, and they will need to compete for good employees by offering incentives. Democrats assume that an incentive is when the wise people in government tell corporations what extra they must do for their customers, like Obama’s requirement that Pizza parlors list all of their ingredients on a visible sign with the calorie count for each. (um, people who are counting calories don’t buy pizza).

Wells Fargo and Fifth Third Bancorp said they would increase their minimum wage to $15 an hour, and Fifth Third is throwing in a $1,000 bonus for hourly workers. Nexus Services is giving a 5% pay raise to its employees and hiring 200 more.

Democrats remain sure that it’s all about tax cuts for the rich, and have been shrieking that for months, and the negative media spin has indeed resulted in poor opinion poll numbers. People have been told over and over that they tax cuts only go to rich people and everybody else will suffer. Yet well over 80% of the people will receive a cut in their taxes.

Europe is worried. The tax reform passed in Washington this week is a challenge to Europe’s big taxers. This opens a new competitive war with Europe’s high-taxing governments. The bill cuts the top federal corporate rate to 21% from 35% which brings down the average effective rate including state and local taxes down to about 23% from around 29%. This also creates incentives for European companies to invest in America. German executives will wonder why they should build their next factory in Germany with a 31% effective corporate rate + more troublesome labor regulations and an aging population. This is a big shock to the European system.

Republicans don’t do a good job of explaining what tax cuts mean and why they work, but assume that other Republicans will understand and celebrate. I believe that most people could not tell you how much they paid in taxes last year— without looking it up. They have their taxes withheld, and pay no attention to the pay slip, and just turn the whole thing over to their tax guy and put it away in a file. Who wants to think about taxes? When the government takes less, America is set free to innovate, create and grow.

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Canada’s Lower Tax Rate Raises More Tax Revenue by The Elephant's Child

We previously nattered on about President Obama’s idea of “Economic Patriotism,” which only shows that the president has little understanding of business and how it operates. The Left is deeply suspicious of business, at least Big business, and often labors under the delusion that it would be far better without business, or with business more completely controlled by government, so they didn’t cause so much trouble and especially pay their executives so much.

All this came about through what has come to be called “inversions” or businesses’ choosing to locate their executive offices in other countries to lessen the corporate tax hit. The latest case is Burger King’s purchase of Canada’s Tim Horton’s chain of coffee and donut shops and plan to move their headquarters to Canada. How unpatriotic to attempt to evade America’s corporate taxes, the highest in the world. Um, Canada’s total tax costs are 46.4 percent lower than in the U.S. Why would Burger King want to move there? Canada has the most business-friendly tax policy in the world!

The one solution that would quickly solve the problem is quite simple. Cut or eliminate the corporate taxes, especially the tax on income earned abroad.  Inconceivable!  Lower taxes, and give up all that revenue when our economy is so slow? When we so desperately need more jobs? Canada lowered their taxes to help business out during a recession. But, but tax receipts! We must have more money!

How much tax revenue did Canada lose by the dramatic reduction in their corporate tax rate, from 43 percent in 2000 to 26 percent today?

Answer: None.

We have tried to tell you. Canada’s lower corporate tax rate raises more tax revenue.

According to OECD data, corporate tax revenue increased after Canada cut corporate tax rates beginning in 2000. Relieved of a crushing tax burden, corporations grow organically through lower start-up costs and reinvestment of after-tax earnings. They make more money, and the government gets more revenue. Works every time. It shouldn’t remain a mystery, and it certainly is not “Economic Patriotism,” which is just another of their clever talking points.

Democrats will attempt to use Economic Patriotism as an issue in the election this fall. Don’t be fooled. They just have no understanding of business. That’s why our economy drags along sluggishly while across the northern border Canada’s is booming.




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