Stimulus Equals Zero Taxes
Bill Warner Sunday, February 22, 2009
I really don’t understand why it is so hard to understand why US business is not competitive and we are losing jobs to foreign countries. It’s because the profits on US business is taxed at the rate of 35%. It’s the second highest tax rate in the world just behind Japan. Think about it. US business has to compete with an anchor tied to its leg. Other countries can therefore produce goods resulting in lower prices because they don’t have to pay as much of their profit to their governments.
There are other anchors too, like unions that drive up wages and pension fund requirements. Government regulations also result in tremendous operating expense demands for compliance, like Sarbanes Oxley. Some of these regulations are necessary in order to assure that our goods are safe and not otherwise detrimental to the public, but many are an unnecessary burden on businesses. The reason we lose jobs to foreign countries is that we drive many industries out of the US with our tax and regulatory structures.
What if tax was zero?
What if the stimulus bill had done one simple thing; reduce the corporate tax rate to zero, and then brought it back in several years at a rate that is below the rate of the world’s leading economies? Businesses would not have to move offshore to be competitive, and instead hire Americans to do the work. We would see an almost immediate stimulus to the economy that represents lasting growth:
- US businesses would immediately become more profitable, making funds available for investing in new growth.
- Companies would invest in new products and services, reducing or eliminating the need for layoffs.
- Investing in the training of employees will increase because they are more likely to stay in companies that have a strong US presence.
- Worldwide prices for US products could be reduced to be more competitive with other countries, increasing sales for US companies.
- New businesses that supply US industries would be started; offering new jobs to build components and parts at competitive prices.
- Foreign companies will be more likely to open new companies in the US thus increasing the number of US jobs.
This would be great for all businesses and great for entrepreneurs who will not have to climb such a steep hill to create new businesses. Read more about taking the business tax rate to zero.
Just a dream
Unfortunately, we are not doing this, and doing things that will further stifle US business. Instead, we are going to borrow from foreign countries and print more money, increasing our debt and leading us to rampant inflation in a year or two. When the economy continues to drop and the jobs don’t appear as promised, remember that we elected these people that brought us the stimulus package. We will have another chance to get this right in 2010.
Filed Under: Angel Investment, Financing a Company, International Business, Starting a Business
Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.
Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.
