It seems it was only a year ago that newspapers across the country were sounding the bells, rejoicing in the fact that we “are all Keynesians now“. You could imagine my surprise, then, when I read a headline on CNBC.com positing “Would Lower Corporate Taxes Help Jumpstart US Economy?” Now, I know as well as anybody just how liberal most of the mainstream media is but even I caught myself thinking “Finally…. the media has realized that Keynesian economics doesn’t work.” Alas, I could not have been more wrong. The article was, in fact, nothing more than a litany of arguments against cutting corporate tax rates under the rubric of a devil’s-advocate question. In short, highly misleading.
Mia Lamar, the Author begins her “article” thusly:
The arguments for both are the same: tax cuts—whether for individuals or corporations—will kickstart economic growth and create jobs at a time when the recovery appears to be stalling.
Actually mia, this isn’t really an argument at all… but more of a conclusion (that tax cuts will jumpstart the economy) based on an argument (reasons why tax cuts will jumpstart the economy) you haven’t even acknowledged. This sloppiness in your introduction is not an encouraging sign… I must say…
You continue with your analysis:
Though many economists agree a higher rate makes the U.S. less competitive over the long term, they are mixed about whether cutting the corporate rate would have any immediate impact.
The reason, they say, is that cutting corporate taxes isn’t focused specifically on expanding operations or creating jobs.
“You could create more opportunity for job creation,” said John Canally, an economist for LPL Financial. “But (corporations) could take that money and invest overseas. You can’t tell them what to do.”
SEE… SEEE (I hear you saying) tax cuts won’t stimulate jobs because, gosh darn it, you can’t tell corporations what to do with their money. They “might” invest overseas and we just can’t take that risk now, can we? But then you had a light-bulb moment, didn’t you! WHAT IF… the government could tell corporations what to do with their money! Problem solved!
[T]ax incentives—like the payroll tax exemption enacted last March to encourage hiring—are textbook tax approaches to economic downturns, says Doug Shackelford, a tax professor at the University of North Carolina Kenan-Flagler Business School. ”These targeted jobs credits, that’s what supposed to work,” Shackelford said. “So if you told me you have one tax trick to play, I’d say we are playing the right trick right now.”
This “textbook approach” wouldn’t happen to be written by former Enron Advisor Paul Krugman, now , would it?! No, seriously though… providing one-time tax incentives (aka government coercing business to act in pre-determined ways through the pulling of financial strings) isn’t really working all that great in helping to actually create jobs now, is it? Mia, do you not even begin to doubt these self-proclaimed “experts” relying on “textbook” fixes when the reality of their results is so clearly in contradiction with their projections?!
Clearly you haven’t because in the very next paragraph… just moments after arguing that one-time tax credits DO INCENTIVIZE businesses to hire… you then reject the notion that LONG TERM incentives would do the same:
“The rest of the world has come down a lot, so now we are an outlier on the high side,” said Shackelford. Still, he added, “I think it’s a real leap to say that, oh well, because a nickel of my profits won’t be taxed I’m going to go out and hire…that’s really stretching it.”
Ya… just nickles and dimes… I mean… a 5% corporate tax rate cut really doesn’t provide most corporations more than a small handful of extra change, right!
*SIGH* Yes, ladies and Gentlemen… this was the argument Miz Lamar made: that a “nickel” of profit just would’t be enough to make a difference. After suggesting that a one-time credit would create jobs… she finds it suspect that 5% more income in perpetuity would do little for job creation. This is where Miz Lamar’s ability to comprehend the business world couldn’t be more clear: Businesses are not reactionary creatures… darting haphazardly from one tax credit to the next. On the contrary, they are organizations with 1,2,5, even 10 year plans… plans that will likely to be presently affected by the impact of future income gains.
One has only to look at the measly growth in the jobs sector to realize that the current administration’s economic policies are not solving our jobs problem. In fact, the multitude of new, untested regulations, laws and mandates are putting most corporate plans “on hold” until they know what the future will actually look like. Given the weak growth in the last few quarters, growth plans are on hold and survival instincts are taking over. The only way to reverse these instincts are to guarantee a more favorable economic climate in the future. Unless Obama’s tax and spend policies change… don’t hope for private sector job growth anytime soon.
via US Corporate Tax Rate: Would Lower Corporate Taxes Help Jumpstart US Economy? – CNBC.