Fair Tax Nation

Replace All Federal Taxes on Income with the Fair Tax Act , HR 25

Commenting on last week’s post, Pension Choice, a reader questioned how we would provide jobs for younger workers if older workers postponed their retirements. Once again, my libertarian solution for jobs is ridiculously simple: eliminate the corporate income tax.

Before you let fly with the angry anti-corporate letters, bear in mind the corporate income tax only brings in about $300 billion in a good year, while estimates of the costs of corporate subsidies, bailouts, price supports, and the like run as high as $350 billion. There are now over 1,800 subsidy programs, a number that has doubled in the past 20 years.

Eliminating both the corporate income tax and all corporate subsidies provides instant deficit relief as well as triggering an economic boom that will make China look like Sheboygan Junior Achievement. So let’s do welfare-to-work for the Fortune 500 and let the other 2.7 million American corporations compete on a level playing field for once.

Now, you won’t hear this proposal coming out of Washington, because the statists in both establishment parties love tax subsidies like Lindsay Lohan loves snorting coke in a stolen fur. Subsidies are what generates the return on investment in lobbying and campaign contributions; tax breaks and earmarked spending are the only things that politicians have to offer fat-cat donors in exchange for their millions.

Eliminate the selective corporate tax credits and subsidies and we liberate the legislative process from the corrupting grip of special interest money. Eliminate the corporate income tax entirely and we insure that all the zombies remain in their graves. And the static-score deficit reduction of $50 billion is mice nuts compared to the dynamic effect that eliminating corporate income tax will have on economic development and job creation.

We don’t need a CBO score to understand the economic effect of eliminating corporate income tax. Other nations have been cutting their tax rates to lure our corporations, facilities, and jobs from us for decades. If our 35% rate is enough to chase jobs to a 25% country, think about what our 0% rate will do to bring jobs here – and I mean jobs by the millions.

Thousands of Americans leave high tax states for low tax states every day; economics works the same way for countries, and we should aim to be the Tennessee of the G-20. Firms will be coming from all over the world to fill up all our empty industrial parks.

The number of jobs created will not just be big; it will be Joe Biden big – and not a moment too soon for the millions of Americans still unemployed and underemployed.

In case you missed it, the Federal Reserve recently estimated it will be years – years, mind you – before the economy just gets back to where it was before the big dump and the unemployment rate falls back under 6%. There is no reason to wait years just so President Obama can finally learn how wrong he is; we can put ourselves back to work right now and let him figure it out for himself later.

More jobs beget more jobs as people work, save, spend, and invest. Eliminating the corporate income tax will reverse our death spiral of higher taxes, more government spending, increasing unemployment, and corporate disinvestment in one fell swoop. The economic vortex is a drain in one direction, and an updraft in the other. Is there an easier or faster way to change direction and initiate the updraft than to eliminate corporate income tax? Let’s hear it, and not from Ben Bernanke.

But what about the corporations who depend on those tax subsidies to survive, you may ask? They will either adapt or they will fail, and good riddance to those that fail. If a firm is not economically viable without a subsidy, it is not economically viable. Whole industries will be rationalized and economic efficiency will rule. Free markets – unlike the Minnesota Vikings – do not keep funneling limited resources into obsolete and underperforming technologies year after year.

And economic efficiency, not government subsidy, is the key to our prosperity. It is ridiculous to expect free markets to operate properly with over 1,800 federal interventions managed by people with no business sense. 50% of Americans are of below-average intelligence, and there is no reason to believe that the lure of regularly updated cubicle furniture and two extra holidays per year attracts the upper half into government service.

Until such time as comprehensive tax reform gives us FairTax (my personal preference) or a universal flat tax (acceptable, too), elimination of the corporate income tax is the fastest and most practical economic stimulus we can employ. The bill could be written on a page and passed in a day.

Not convinced yet? Then ponder this: big business, big labor, and big government will join forces to oppose it with all their might. The Defense rests, your Honor.

Moment Of Clarity" is a weekly commentary by Libertarian writer and speaker Tim Nerenz, Ph.D. Visit Tim’s website www.timnerenz.com to find your moment and order his new book, "Tooth Fairy Government."

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Comment by Tim Nerenz on November 30, 2010 at 3:03pm
All good points, Hank. My views on siting facilities come from 35 years of experience in doing so. As you say, there are many factors that go into those decisions - also exchange rate fluctuations in addition to those you mentioned. It is the marginal costs that drive optimization decisions, including siting operations. Also, different types of businesses are vastly different - Google can avoid nearly all US taxes by legal tax dodging, and it has huge revenue to employee ratios. Automobiles, that have multi-country labor content would be greatly influenced by changes in tax rates. Retail sales outlets are stuck in place, taking tax rates out of play helps the little guy. The 3% is not all 3's. It is a bunch of huge zeros who moved jobs and profits out of US tax and regulatory jurisdiction, and then lots of smaller guys who pay full fare unless they get subsidies. Thanks for you thoughtful comment!

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