Posted on 07/30/2007 5:50:21 AM PDT by John Galt 72
Carl’s Levinomics: Wrong Diagnosis, Wrong Remedy
By Matt Carrothres
July 30, 2007
The late British economist Ernest Benn once said, “Politics is the art of looking for trouble, finding it whether it exists or not, diagnosing it incorrectly and applying the wrong remedy.” Benn’s apt description of machinations in the political arena can be applied today to liberals’ understanding of economics and the correct tax policies necessary to expand the economy.
On July 24, the U.S. Senate Homeland Security and Governmental Affairs Committee held a hearing to consider President Bush’s nomination of former Iowa congressman and House Budget Committee Chairman Jim Nussle to Director of the Office of Management and Budget. During the hearing, Senator Carl Levin (D-Mich.) asked Nussle, “We’ve spent a great deal of time looking at what’s called the tax gap, which the IRS has estimated to be about $350 billion. That’s the gap each year between the amount of taxes owed and the amount collected . . . One of the sources of that tax gap are the abusive tax shelters.” Levin blamed “upper income folks” for utilizing tax shelters and “not paying their fair share.”
Nussle indicated that as House Budget Chairman he did look into tax shelters, and as OMB director would continue to work with the Treasury Department and Congress on the issue. He added, “Let me say further if I may that I’m someone who was a proponent of looking at our entire tax code for comprehensive reform. I believe that we should consider reforming our entire tax code.”
Levin then looked down at his prepared notes and continued his questioning, as if Nussle’s answer failed to illuminate in the Senator even the lowest wattage of bulb.
Levin continued: “Thank you. We’ve lost 3 million manufacturing jobs in this country in the last six years . . . In the area of manufacturing, we’ve lost these 3 million jobs without much of a peep from this administration. Other countries support their industry. They partner with their industry... Do you believe there’s a very important, vigorous role that’s essential for the federal government in terms of support of manufacturing in America?”
Again, Nussle attempted to explain to Levin the direct relationship between taxation and a robust economy. Nussle said, “I believe in order for us to be competitive, one of the areas, as we were just talking, is our tax code. One thing we’ve always prided ourselves on in this country is that we have an arms-length relationship with those businesses.”
Corporations seek favorable tax havens and move their manufacturing plants overseas because the U.S. corporate tax rate stifles the opportunities to maximize profit. Further, it reduces the amount of capital available for research and development, reinvestment and creating new jobs. According to the Heritage Foundation’s 2007 Index of Economic Freedom, the U.S. has a higher corporate tax rate than 39 European nations, plus Hong Kong, Singapore, Japan, Taiwan, Australia, New Zealand and India. In 2004, 29 of these 46 nations produced a higher percentage GDP growth than the U.S.
Related, a 2006 National Association of Manufacturers study found that corporate taxes, health care and regulations add a 32 percent cost disadvantage for U.S. manufacturers against nine major U.S. trading partners.
A 2007 Tax Foundation report that analyzed the business tax climate in all 50 states ranked Levin’s home state of Michigan last. Michigan’s Single Business Tax is the nation’s highest effective tax on corporate income. Michigan also features the nation’s 14th highest combined state and local tax burden on individuals.
It seems impossible that Levin, whose state is the corporate home of the Big Three auto manufacturers, could so completely fail to comprehend the cause and effect relationships between tax policies, economic growth and lost manufacturing jobs. Worse, his solution is to increase enforcement of our Byzantine tax laws and the government’s role in our free market economy. To apply Ernest Benn’s definition of politics, Levin incorrectly diagnosed the causes of corporate and individual use of tax shelters and lost manufacturing jobs. He then prescribed the wrong remedy.
The common sense remedy to stem the flow of corporations, capital and jobs overseas is clearly to eliminate state and federal corporate income taxes. Instead of pursuing common sense tax policy, however, this year Levin introduced the “Stop Tax Haven Abuse Act” to clamp down on corporations and individuals who take advantage of offshore tax shelters. Levin demonstrated his mastery of economics by stating, “Offshore tax havens have declared economic war on honest U.S. taxpayers.”
The enemies of U.S. corporations and taxpayers are not offshore tax havens, but liberal lawmakers like Senator Levin who view corporate and individual income as a possession of the federal government. They see lost manufacturing jobs not as a treatable or even preventable malady, but as merely another opportunity to apply the wrong, liberal remedies.
© 2007 North Star Writers Group. May not be republished without permission.
One wonders how wealthy the Kennedy’s would be today if there weren’t the tax protection devices protected by black sheep Ted.
It’s more a matter of Levin, as a liberal, not wanting to give up any of the control over us the government imposes via it’s tax “games.”
why are liberals like mr. levin so brilliant? is it because they’re atheists which makes them superior to the poor lowly humans who have faith in a supreme being? is it because they’ve taken on the mantle of marxism which makes them brilliant, all-knowing, all seeing within mere seconds of putting it across their shoulders?
the congress is certainly fortunate to have such enlightened individuals legislating marxist morality and standing up to congress people who would stand up for silly Christian morality.
No, I think he is that stupid.
No Democrat understands tax policy. Period. That’s why they all want to raise taxes every opportunity they get.
don’t they realize that if they lower taxes they’d get even more money?
The power of control is more important to them than the amount of tax money they get.
Frankly, none of them seem to - I have yet to hear any liberal, in the last 12 years or more, call for any kind of tax decrease except for those who already pay few taxes - the poor. Liberals don’t seem to think people adjust their behavior in a rational manner.
You would think that they would look at Bush’s tax cuts, the money now coming into the Treasury and say whoa! let’s have more of that, but no. And I don’t think it’s just BDS, either. They all seem to look at Bush’s tax cuts, for example, and say, if at these rates we get this much money, at higher rates we’d get x+y dollars. None of them have connected offshoring with our sky-high corporate tax rates, for example.
in Europe they do. corporate taxes are cut all the time there.
http://www.iht.com/articles/2007/05/28/business/tax.php
Why? because they are forced to compete and they know this works so they do it. In the US there is no threat of competition-what? we’re going to Mexico for a job???
No threat of competition here ?
How about outsourcing to India, China, and yes Mexico. We’ve sent a lot of manufacturing to Mexico, chico. And we’ve had a lot of banks and insurance companies move headquarters offshore to Bermuda, the Islands and the like.
The Dims would like to THINK American firms have noplace else to go.
well yes the dems are definitely threatened by the offshore companies. So they will tax them and see if they can get away with as much as they can without throwing the country into a recession.
my point is, the dems will be able to get away with a lot of tax pain before reality hits them in the nose. In europe, even the socialists are cutting taxes because they have to.
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