Tariffs, Taxes and putting people back to work

For all the game playing on Wall Street- and in Congress, there really hasn’t been any serious discussion on how to get U.S. companies to stop hoarding cash and doing M&A. And the talk about tariffs on trading partners gets squashed the moment that you realize it will raise prices on everything in the U.S.- something our working poor can ill afford right now.

It’s well known that American companies have been playing games with corporate taxes- Google used a Bermuda subsidiary to end up paying 0 in U.S. corporate taxes- other American companies- like GE- make no money in the USA according to their accounting tricks.The system has been co-opted, it does not work.

It’s time to make it profitable to employ people in this country again.

Let’s start with raising the maximum U.S. corporate tax rate to something like 50% – and then give breaks based on how many U.S.-based employees you have (non-executive). We also have to look at who makes your products- designing them here- to have them built in China doesn’t mean those people don’t work for you (Apple, GM, Bank Of America with your Indian back office).

The second part of this equation would be taxes on benefits and perks- lavish executive perks packages would be taxed based on the perks offered the employees. If you don’t offer health insurance to your employees- you don’t get it pre-tax. If you don’t give stock to employees – it’s taxed as personal income, not at capital gains rates. Last but not least, give tax breaks to the rich who employ Americans- and tax the hell out of those who offshore their labor forces.

We’re all in this together- and if American’s aren’t working- America isn’t working.

Your thoughts? How do we put Americans back to work?

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12 Responses

  1. Steve December 21, 2010 / 9:17 am
    How to put people back to work? Shut down Facebook, Farmville, Twitter, Youtube, esrati.com (kidding), and other time waster websites. Help the economy: get up, get out, and do something.

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  2. Greg Hunter December 21, 2010 / 11:52 am
    Germany has unions on the management team, while America entices the greediest to go to Wall Street, denigrate the Middle Class and blame it on Unions.  It is done in the name of God and America.  The name to this process is John Kasich.  Good Luck Ohio and America!

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  3. Robert Vigh December 21, 2010 / 2:09 pm
    Idea #1) Reduce the amount of time unemployment lasts. With the latest extension, you can live on the dole for 3 years. Yes, I as a business owner have had the personal experience of not being able to find someone to work part time for $10.00 an hour because I cannot compete with getting money for nothing. I also, could not entice 2 sales people for 40K / year, because they were going to take unemployment for awhile and get some grant money to attend classes.
    Idea #2) This is my unrealistic idea people are not prepared to face. When you tax something, you typically get less of it. Meaning, get rid of payroll tax………….you know, the tax that funds Social Security and Medicare. Get rid of those 2 programs along with the payroll taxes that partially fund it and employment will increase.
    Idea #3) Modify the S Corp so that taxes can be deferred if reinvestment into the company is made.
    Idea #4) Protect Private property. In essence, remove impediments to starting businesses by layering bureaucratic control over property. Hence, Dayton’s ability to impede business.
    Idea #5) I like the fair tax.
    Idea #6) Remove subsidy for industry, allow the market and entrepreneur to safely and accurately identify market demand and risk.
    Idea #7) Ease licensing requirements for all professions, including medical.
    In critique of David’s ideas which essentially raise taxes or tie one persons performance to another persons, I would highly recommend against that. Not sure how raising corporate taxes to %50. helps employ people? That just takes more money out of employers hands.
     

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  4. djw December 21, 2010 / 2:21 pm
    Let’s start with raising the maximum US corporate tax rate to something like 50% – and then give breaks based on how many US based employees you have (non-executive).

    With respect, I don’t think this is a great idea. If I were the all-powerful overlord of tax policy reform, I’d actually lower the corporate tax rate, but expand the base of the taxable activity considerably. The actual corporate tax rate is high but misleading, since there are so many loopholes (done in at least a revenue neutral, if not positive way, so I’m not advocating lower taxes, just lower tax rates). But it’s also brutally unfair; for all the googles and GMs there are other, less well connected companies that pay a fair amount of tax. This uncertainty is detrimental to investment and growth in the not well connected corporations. In general, I think we already do too much social policy through tax credits, it’s a bad habit we’d do well to break. There are other, better ways government can promote certain social outcomes than tax incentives.

    Ryan, the so-called fair tax* starts with a very good general idea (our tax code should be radically simplified) and quickly moves to a brutally stupid and hopelessly unworkable conclusion (we should only tax consumption). Think about it: you’re economically incentivizing people to engage in as much of their consumption abroad as possible. It’s a huge disincentive to spend money in the US. (I’d never take a domestic vacation again!) Our economy is increasingly based on service; that sector would be decimated. Even it’s more honest proponents admit we’d see a spike in unemployment for a many years under this proposal, primarily in the service industry. This, coupled with it’s inherently regressive structure, would create a pretty dramatic spike in poverty. (And the poverty reduction ‘prebates’ advocated would help with that, but they’d also render the tax utterly unable to collect enough revenue–those who think we could pull this off with 23% rates are completely delusional). And that’s just for starters–it’s not something economically literate people would ever seriously consider.

    *I still have not yet heard by taxing consumption is more inherently “fair” than taxing income or wealth. Advocates treat this as axiomatic but it really isn’t.

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  5. Ice Bandit December 22, 2010 / 6:34 am
    Let’s start (jump starting the economy) with raising the maximum U.S. corporate tax rate to something like 50%…(David Esrati)
     
    …and other David Esrati suggestions include running under trees during thunderstorms, placing the baby face down in the crib after a brisk and thorough shaqking, and replacing the baton during relay races with pinking shears……..

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  6. David Esrati December 22, 2010 / 10:31 am

    @IceBandit- and taking a short quote out of a longer one is sort of like pulling the pin- releasing the spoon- and then forgetting to throw.

     

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  7. Ice Bandit December 22, 2010 / 12:31 pm
    ….sorry David, but the Old Bandito thinks that any suggestion for rejuvenating the economy that include the words “raising the corporate tax rate” is not too dissimilar from suggestions for preserving chastity that include the words “get really wasted at a frat party.” But as long as we are talking about taking the defibbulator to the flat-lining economy, try this suggestion; scrap corporate taxes now and forever. This would do away with the fiction that corporations pay taxes, which anyone who had the capacity to stay lucid during the first five minutes of Econ 101 will tell you, that business taxes are paid by consumers buying the good or service. Prices would immediately go down, employers would have more money for hiring and expansion, the market would immediately kick into hyper drive, and the Blue Jackets will win the Stanley Cup. And about staying awake during the first five minutes of Econ 101, the Old Bandito is taking other people’s word for this; his face kissed the desk as soon as the prof said “good morning claSS……..

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  8. steve December 22, 2010 / 7:55 pm
    @ice bandit

    And anyone who pays attention to the next 5 minutes of Econ 101 knows that prices are dictated by supply and demand, not taxes. A corporate tax break will go straight into profit, that’s why gas prices wont go down if they get rid of gas taxes. A 50% corporate tax will make it not so profitable to be in just about any business, and capital will absolutely pour out of the country.

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  9. David Esrati December 22, 2010 / 9:18 pm

    No one here seems to notice the part about the corporate tax rate decreasing if you employ Americans- a company like Kroger which hires lots of Americans would end up with a very low corporate tax rate- a company like Apple that outsources almost all its manufacturing would pay more. Hire Americans- decrease your tax liability.

     

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  10. Robert Vigh December 23, 2010 / 6:17 pm
    Econ 101: If tax breaks on a product increase profitability, does it not stand to reason that a competitive environment would then see companies pursuing greater market share by lowering the price? Or do you think larger margins and tax breaks do not signal to investors and entrepreneurs to get involved?
    Lets take your reasoning to the other end. If we increase taxes, that will not create a rise in prices? Corporate America will simply accept lower margins and profitability and the market will not make an adjustment to maintain its profit margin?
    We could also talk about how taxation will change the supply and demand side of the market, but I think I made my point without having to get into that.
     
     

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