Posted on 12/09/2006 5:26:19 AM PST by DredTennis
Cut Corporate Taxes to Boost Wages?
To boost future wage growth, Democrats have suggested raising the minimum wage, making college more affordable, and tweaking the tax code to try to prevent U.S. companies from moving jobs overseas. Here's another idea, one it seems that only the GOP could love–but it was actually adopted by Spain's Socialist Party-led government earlier this year, Germany's Social Democrats in 2000, and Britain's Labor Party in 1999: Cut corporate income taxes.
The combined top federal, state, and local corporate tax rate in the United States is 39.3 percent, the second highest (after Japan) among the 30 countries of the Organization for Economic Cooperation and Development and 10.7 percentage points greater than the OECD average. Heck, even the welfare-state-loving Scandinavian countries–Sweden, Denmark, and Norway–have a combined average corporate income tax rate that is more than 11 percentage points below the U.S. rate.
How would cutting corporate taxes help workers? Because of the increasing global mobility of capital, owners can escape taxes by shifting capital overseas. That hurts domestic workers because "their productivity falls and they cannot emigrate to take advantage of higher foreign wages," as a new report (PDF) from the nonpartisan Congressional Budget Office explains. The study concludes that domestic labor bears slightly more than 70 percent of the burden of the corporate income tax. What's more, a 22-country study from the conservative American Enterprise Institute found that higher corporate tax rates lead to lower wages, with a 1 percent increase in corporate tax rates associated with a 0.7 to 0.9 percent drop in wage rates. "Lower corporate taxes will lead to higher wages over time," says Kevin Hassett, a coauthor of the study ...
(Excerpt) Read more at usnews.com ...
cut taxes and bureaucracy and more jobs will magically stay in the US
Only to lefties.
Economists have been saying this for decades. It's another one of those things, though, where they say "The corporation income tax is bad for the economy, but it's only a little bit bad, so it's not worth getting worked up over." Just like the minimum wage and labor unions.
If the article means that higher profits lead to higher wages, ExonMobil must have the highet paid employes on the planet.
"counterintuitive, yeah?"
Tax breaks for "corporate fat-cats" who "gouge the consumer" at every turn?
No, in a democrat congress any corporate tax breaks will be "targeted" at "needy" companies like media conglomerates. There will be a corporate version of "earned income credit" whereby "the rich" companies will directly transfer revenue to companies that just need to "get on their feet".
Democrats will argue that only government is capable of addressing the financial needs of "the worker" who is abused by corporate america by giving them free health insurance, and a shorter workweek, and additional "protections" against companies that make rational economic decisions to grow outside the US to avoid taxes.
I doubt that it will do anything to retain jobs. Business will go where the cost of labor is less, period. Drop taxes, and the savings will go to the profit column. Reduce regulations and thus cut business costs, and the savings will go into the profit column. The long term view of business almost never extends past the next quarter's financial statement and so long as it does then manufacturing and sevice jobs will continue to flow out of the country
"and tweaking the tax code to try to prevent U.S. companies from moving jobs overseas."
As another posting also suggested,how about tweaking the tax code to "ENCOURAGE not PREVENT" US companies from moving jobs, an maybe even attracting foreign companies to setup shop here !!!
If anyone would like to be added to this ping list let me know.
H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information:
The "corporate tax" is not a real tax on corporations.
Whatever the current rate it is simply passed on to consumers. Therefore, it is a hidden component of the price you pay for the products and services you buy. The corporation is simply a conduit between the consumers and the tax man.
Reducing the rate will make goods and services cheaper which is good for all.
One place to start would be to lower our corporate income tax rate to a level enjoyed in such free-market bastions as France and Germany. :)
I really don't think you show much knowledge or insight. Although labor costs are far and away the biggest line in a business budget, what most people around here refer to as cheap labor is not cheap at all. At 4.0 unemployment I found myself dealing with lots of felons and they presented many problems. Which is just a way of illustrating that productivity makes money, not just payroll size. Good workers are worth their weight in gold, and rational employers bend over backwards to retain them. I've been there and done that. Sounds like you have only been to union meetings which sought to protect workers who don't work.
"The "corporate tax" is not a real tax on corporations."
What a load of crap! You should see my tax returns, yet if I raise my prices I fall OUT of competition. Yes, I'm a Corporation.
Corporations cannot be lumped into an Exxon/Mobil category.
Corporate taxes are reason #1 why jobs move overseas.
No, I think they mean that allowing companies to give year end bonuses to employees will subtract from their tax liability.
In other words, pay the government or pay the employees.
But these kinds of proposals upset the established order set by democrats for decades and barely touched by Republicans.
Democrats would argue the minimum wage can accomplish the same thing but that would be a specious argument. Minimum wage usually spikes wage increases across the board. But corporations still face the same tax load.
So it boils to this:
They can
1. squeeze payroll or
2. squeeze corporations or
3. squeeze government.
This article is about the last option. Of course they can tweak a little on some or all of the three above.
Of course the largest union in the USA will stop option 3 above.
I actually like corporate taxes better than income taxes.
The stupid people don't understand that corporate taxes are passed onto them via higher prices for the things they buy, so they pay more corporate taxes than anytyhing else, especially if they have little income and pay little or no income tax.
ExxonMobil, over the last 20 years, has been a very normal company in terms of profits vs. money invested.
You don't remember 1.00 gas in 1999 do you ?
Yes, in the last 2 years, exxon has made out like bandits, but that has only been for 2 years.
Further, big oil is somewhat unique in that their major expense is not for labor, but for govt leases and royalties for drilling. Hence taxes on big oil has relatively little effect on its employees.
You are wrong. Business will go where the profits will be the greatest of which labor costs is but one factor in the formula.
With that statement you have confirmed that you have little or no understanding of market economics at all as the price of labor is but one small consideration in the overall equation and competition for market share plays a very much larger role.
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