Why tax cuts are right idea
Imagine a baseball team requiring players use 50-ounce bats, while all other teams use the standard 32-ounce slugger – a huge difference when facing 95 mph pitches.
Even an obtuse team would eventually see its mistake and move to rectify it. Right?
Wrong. For decades, in a nod to insanity, both parties in Washington adamantly refused to change the largest factor keeping America’s economy stagnant: The world’s highest corporate tax.
But keep your fingers crossed because maybe, just maybe, things might change. If Republicans pass their sweeping tax overhaul bill, America’s economy will finally get the jumpstart it so desperately needs.
The ivory tower analysts have come out against the bill. Their objection is that tax cuts will add to the national debt, ultimately hurting the economy – a sentiment echoed by many Democrats.
There have been two major tax cuts in modern American history (under presidents Kennedy and Reagan). In both cases, the economy was catapulted into overdrive, and the reason was simple: Americans don’t save; they spend.
It is a win-win chain reaction born from people keeping more of their own hard-earned money. So, for example, when a family or business builds an addition, they are employing bankers, plumbers, electricians, concrete workers, carpenters, interior designers, architects, laborers, and landscapers. They are keeping lumber, drywall, flooring and furniture companies afloat and staffed.
That keeps truck drivers and deliverymen employed, which in turn boosts truck manufacturers, vehicle dealers, mechanics, tire companies, aftermarket parts businesses, and fuel companies.
Every one of those individuals and companies pay taxes. And the more they make, the more they pay. Everyone wins. Free market at its finest.
The hypocrisy of the newfound fiscal hawks in Congress is sickening. The national debt skyrocketed from $6 trillion in 2000, to an incomprehensible $21 trillion today – with no tax cuts. Yet those responsible for that abomination, Republican and Democrat alike, are now crying that the tax plan might add $1.4 trillion to the debt – over 10 years! Tax cuts won’t add to the debt, but for argument’s sake, if you assume the critics to be right, that means they’re worried about adding $140 billion a year to the debt. Really? Washington spends that in the blink of an eye with zero return. At least a tax cut would have a monumental investment impact on the economy.
The issue with deficits and the national debt has nothing to do with tax cuts and everything to do with congressmen not doing their job. If they had – reining in spending and running the government like a business – we wouldn’t have crippling financial problems.
Many U.S. companies have relocated overseas entirely or “redomiciled” in countries with substantially lower corporate tax rates, such as Ireland. And for good reason: other nations realized that the more they lowered their tax rates, the more wealth and working capital they would attract to their shores.
The loser, of course, has been the United States, with its staggeringly high rate of 35 percent. Worse, effective rates are even higher after state and local taxes are levied. So a Pennsylvania company pays the world’s highest corporate tax, on top of the nation’s second-highest state corporate net income tax, on top of local taxes (and Philadelphia is, cumulatively, the highest-taxed city in America).
Sky-high rates are anathema to competition. They stifle innovation, cause job cuts, place a cap on new hires, and remove capital from the free market, where it could have been invested in projects and people. But lower that rate, and it’s off to the races.
Apple has over $215 billion parked in favorable locations overseas, compared to just $16 billion stateside. Make America more competitive, and it becomes a watershed event as billions flow homeward.
Sir Winston Churchill rightly stated, “We contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
President Trump and the Republican Congress – no more excuses. Your inaction thus far has been extremely taxing. Time to pass the cut so we can take our money – and you can take your re-election – to the bank.