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Taxes and Jobs

July 15, 2014

Needed: A Patriotic Tax Code

By

Anyone who supports the current tax system in America is unpatriotic.

There, I said it. The current IRS tax system is anti-American. It sends jobs and factories and research facilities that should be located inside the land of the free to places like Singapore, Ireland, and Indonesia. It hurts American workers — especially unionized blue-collar workers who see their jobs shipped overseas. And our workers’ wages are lower than they would be without this perverted tax code.

From a competitiveness standpoint, this is like Tim Howard playing goalie with just one hand. He’s still better than most, but it’s just dumb.

No rational person can deny that our corporate tax system puts America at a severe handicap. I spoke recently with a former executive from Microsoft who now serves on the boards of directors of several major U.S. manufacturing companies. “We don’t build plants in America anymore,” he told me. “We can pay tax rates half as high in Asia.” In many countries, he said, American companies can arrange sweetheart deals “to cut our corporate tax to close to zero.” They can stay in the U.S. and pay 35 percent, or they can go to Indonesia and pay nothing.

When will Washington wake up? In recent weeks and months, we’ve seen drug giant Pfizer threaten to become a foreign company and Medtronic, a medical-device manufacturer, announce it will merge with foreign owners and then move operations and jobs to Ireland. Former Medtronic CEO Bill George told the New York Times that taxes were a major factor in sealing the deal. Ireland’s corporate tax rate: 12.5 percent.

Wake up!

Meanwhile, Barack Obama is running around the country telling the American people he wants to raise taxes on American businesses. If Obama has his way, there will be hardly any major American businesses left. They’ll be Irish, Chinese, German. This is unpatriotic.

Amazingly, the U.S. used to be one of the lowest corporate-tax countries. Today, we’re the highest.

Who gets it? Even woebegone Japan: Tokyo recently cut its business-tax rate. Spain just announced last month it will try to raid U.S. businesses by cutting its corporate tax rate by five percentage points. These announcements seem to come every week from the capitals of nations around the world, while Washington stays silent.

In the last several years there have been more than a dozen major corporate inversions — firms moving out of the U.S. for tax reasons — and they are speeding up. Washington makes it so easy.

Someone needs to tell the tax whizzes on both sides of Pennsylvania Avenue that a 35 percent tax rate on zero income yields zero revenue. As Mr. Obama might say, it’s just math.

One of the grievances of the Founding Fathers we celebrate on July 4 was unjust taxation. Well, that’s what we’ve got right now.

The U.S. was established as a tax haven — a place where people from around the world could come to keep the fruits of their labor, where taxes were light and fair. We had no income tax for nearly a century after the founding and we did just fine.

This is one of those times “in the course of human events” when we the people must demand that Washington take action, before our abominable tax code destroys our economy and our future.

Happy Fourth of July.

- Stephen Moore is chief economist at the Heritage Foundation.

Originally appeared in the National Review Online

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