Kerry to Offer Cut in Corporate Taxes

[ringmastery]

http://www.washingtonpost.com/wp-dyn/articles/A25175-2004Mar25.html

John F. Kerry today will propose cutting the corporate tax rate as part of an economic plan designed to create 10 million jobs by 2009 and discourage companies from sheltering taxable income overseas, his economic advisers said yesterday.

In essence, Kerry will offer a trade: He would cut taxes on U.S. corporations in exchange for forfeiting current tax benefits for moving money and jobs overseas.

Kerry, fresh from a week-long vacation, is planning to use his first domestic policy address of the general election campaign to call for this carrot-and-stick approach to prod U.S. companies to do more business and create more jobs at home. The speech is billed as the first of three presenting the candidate's detailed balanced budget plan, which will include several new tax cuts.

In doing so, Kerry is seeking to position himself as a moderate, pro-business Democrat similar to Bill Clinton and beat back charges that he is a tax-and-spend liberal.

[ET Awful]

1. Hmmm, I actually kind of like this idea. . . .

Not the first path I would choose, but it's a very good strategic move that will appeal to the more moderate repugs out there.

[MadHound]

2. What a cop out

Instead of enticing corporations like they were widdle spoiled babies, bring the goddamn hammer down on them! I'm sorry, they have been coddled for entirely too long, and following this path in order to entice them back to the US is just more of the same ol' same ol' . Meanwhile, you and I the working slob with get to pay more in taxes to make up for this enticement.

Sheesh. I understand not wanting to make waves during an election run, but if you're going to get harsh on corporations, don't say a damn thing. Promises like this will kill you if you get elected.

[Dr Fate]

3. Kerry will provide tax relief to middle class families

Provide Tax Relief to Middle Class Families

John Kerry has the courage to take on the Bush tax cuts for the wealthiest Americans. However, he believes that we should keep the middle class tax cuts that Democrats fought for in 2001 and 2003. Specifically, he wants to protect the increases in the child tax credit, the reduced marriage penalty and the new tax bracket that helps people save $350 on their first level of income. He strongly disagrees with Democrats who want to repeal these tax cuts because it would cost a typical middle-class family with two children an additional $2,000. These families are often already struggling with higher health care costs and higher state and local taxes. In fact, John Kerry wants to give more tax breaks to the middle class with new tax credits on health care and college tuition. These tax cuts are part of his plan to restore the economy and cut the budget deficit in half in four years.

www.johnkerry.com

[PATRICK]

5. Today's situation

It has to be managed. This is not a socialist revolution. Businesses have been put out on a Bush limb and fault or right has nothing to do with keeping the whole sorry structure from collapsing and hurting mostly innocent people. Kerry is simply making overtures of competence and pro-growth to bring business back into the fold.

When he is president and he is going overboard- even with the Congress he has to squeeze things through- then we can talk about copping out. It is a pipedream right now that he has anything to cop out on unless you think he can win an election solely on the collapse of Junior and the entire GOP.

I was first amazed by the McGovern candidacy, this surly demand for a white knight who was unelectable, a branded tarbaby by campaign's end, all the while Darklord Nixon could literally do any terrible thing he wanted. Actually it went back further, but this routine flogging of our standard bearer I hope has at least some personal masochistic rewards for the perps, because they are the only ones getting anything out of ruining hope for America. You may be sincere, but no less the Sucker Auxiliary for Corporate Wingnut Propaganda.

[MadHound]

13. Now that's funny friend

Classifying me as the Sucker Auxilary etc etc. And your grasp of political history is feeble at best.

First off, it is pro-business policies like this that got America into this off-shoring, outsourcing mess to begin with. Or have you forgotten Clinton and his corporate controlled domestic policy? To entice corportations back onshore is going to require substantial corporate tax cuts, ones that will have to be made up by you and me. Otherwise the beancounters are going to do the math and decide to stay offshore. If you don't make it large enough for enticement purposes, then the outsourcing flood will simply continue, while corporations that are still onshore will reap the benefits. It is a lose-lose situation for the middle/lower class working person. We will have to make up the revenue lost.

This type of carrot and stick approach to corporate reform was tried one hundred and thirty years ago with the industrial robber barons of the day, and all that happened was that the corporations ate the carrot and broke the stick. What makes you think that anything different will happen this time around(I refer you to Kevin Phillips book Wealth and Democracy to see how this type of coddling didn't work before)

No, what is needed is true corporate reform, not in the spirit of Socialism(and I find it laughable that somebody on this board who asks for a return to the spirit of FDR is branded a Socialist, shows how far right the party has gone:eyes: ), but in the trust busting, corporate reform that was brought about by Teddy Roosevelt and FDR. Instead of offering rewards, apply penalties for basing your business offshore. Repeal of NAFTA and other "free" trade agreements that have stripped this country of millions of well paying jobs. Force the people in big business to be responsible corporate citizens instead of treating them as lords of the land who have to be approached on bended knee.

As far as the McGovern candidacy goes friend, do some reading, even if it is only Hunter Thompsons Fear and Loathing on the Campaign Trail '72. Even the most casual perusal of the history books will show you that it wasn't the electorate who wasn't behind the McGovern campaign, it was the Democratic party itself. They wanted their boy Muskie to be annointed, but when he broke down and fell flat, they refused to throw their weight behind the McGovern campaign, considering him too liberal. So much for Anybody but Nixon. And I'm not getting masochistic pleasure out of simply pointing out faults in the Dem nominee. I am trying to point out that by his policies and platform he is taking part in that mummers play of good cop/bad cop, bringing about the formation of the two party/same corporate master system of government. If you want to live in the uber corporate state, fine, but I will fight it tooth and nail.

[blondeatlast]

7. Taking the Bush tax breaks for moving offshore in order to give them

for hiring Americans.

I don't want the corporations coddled either, but this seems a sensible plan to me.

[ACK]

14. Like eliminating the tax break for corps that ship jobs overseas

You mean that hammer?

That is one part. The hammer or we could also call it the stick.

Here comes the entincement or the carrot if you will.

Tax breaks for corps that create US jobs.

carrot and stick approach. Give them enough rope so they can fashion their own noose.

[Nicholas_J]

29. That sounds good...

But in effect is TOTALLY an ineffective way to deal with corporations.There is absolutely nothing to require that a corporation stay in the United States, and the only way of keeping them here is to give them something for staying.

In Europe, corporations are more highly taxed than in the United States, because they have fewer loopholes to allow them to avoid taxation, but the governments social programs greatly relieves corporations of costs that American Corporations themselves bear.
The tax codes now allow corporations take the same deductions for giving corporate executives large bonuses as they do for hiring more employees, courtesy of Reagans changes to the tax codes, which has now come to fruition as a jobless recovery. The only way to make sure that corporations create jobs and benefits for employees is to rewrite the tax codes so that the only way a corporation can benefit from the tax system is to create jobs and update plant equipment. And not to allow them to deduct 30 million dollar condominiums for the CEO to stay in rather than to drive home to COnnecticut every day.

The simply fact IS that corporation and businesses exist to make money, and if there is not enough money in a line of business for the owners to make money, that business is simply not going to exist. Which means the jobs will not exist. Which means more unemployment.

Corporations invariably WILL go where the money is, and if they cant get tax breaks for giving CEO's big raises, but can get tax breaks for creating new jobs, then they will create new jobs.

The suggestion that the government hammer large corporations is the very clever method that the East Germans used to destroy large corporations after the Communist takeover. Rather than directly take over large corporations, they simply created a tax code that made any business larger than a business with 15 employees totally unable to economically sustain itself. When the corporations folded, the government took them over. Resulting in an overwhelming crash in the standard of living in that poriton of Germany, from which it is still recovering. West Germany, which used a tax incentives for corporations rather than the hammer that you suggest, became a rather effective economic engine. Germany outsources more jobs than the U.S. But it also has a more effective system of dealing with displaced workers, another incentive.

This is clearly seen in the differences between the earnings of executives in European compaines and American companies, with European executives earning no more than 15 to 20 times what the lowest paid employees for the company makes, but American executives earning more than 400 time the pay of their lowest paid employees.

It is possible for European C.E.O. to get rich, and live comfortably, but this also results in a totally differnt social structure in Europe, with a far more equitable distribution of wealth.

The carrot works a lot better than the stick in taxation and economics.

Hammering the corporation simply destroys it, and the jobs that go along with it.

A good example is the differnce in working for local governments, where no matter how hard you work, you never get a raise or promotion.
But if your clearly work harder and produce more than another worker, and this results in a bigger paycheck, people have a tendency to work harder, for the most part, as they benefit from it.

[no name no slogan]

45. Keep in mind we have the largest economy in the world

And also one of the largest consumer markets. This gives us, as a country, HUGE leverage with ANY company that wants to sell its goods and services here.

But in effect is TOTALLY an ineffective way to deal with corporations. There is absolutely nothing to require that a corporation stay in the United States, and the only way of keeping them here is to give them something for staying.

We've been coddling corporations, and "giving them something for staying", for far too long. In return for our generosity, they've done very little for the average worker.

I can cite several examples where cities and states gave corporate "incentives" for locating here, with the promise that the corporation would create jobs in return.

Unfortunately, the "jobs" that were created are in India, and NOT here.

Our economy is immensely powerful, and if run for the interest of consumers and NOT multinationals, can be a tool for immense economic good for EVERYONE. Unfortunately, we're all afraid of the threats the big corporations make (and their huge influence on BOTH parties) that we're afraid to stand up and demand the economy and government we want.

[Bread and Circus]

47. Let's not forget that Corporations (shiver) actually provide jobs...

Corporations are not the enemy. Crony capitalism and unbridled
power (with its inevitable abuse) is the enemy.

We need to strike the logical ground. Prosperity (shared equally
as much as possible) is a good thing. Believe it or not.

[cryofan]

53. Yes, but if the corporations were not there, the need for goods/services

...would STILL BE THERE. And someone (NOT a large corporate entity) would be there to provide those goods and services. Yes, it might cost a bit more. Or it might not--imagine NON-MONOPOLIES providing electricity, cable TV, etc.
Then we might have a race to the top, instead of a race to the bottom.

[Jacobin]

4. Corporate taxes have been cut from something like 28% of revenue

to about 10% over the last 30 years. This is stupid. And to say that "oh he'll cut middle class taxes too" is insulting to the american people, because we all know that SS and medicare are going broke, and deficts are looming as far as the eye can see.

When will Kerry get his Robert Rubin economic advisor? Soon I hope.

Jeeze this is depressing

[flpoljunkie]

12. Read Paul Krugman today. Social Security & Medicare are NOT going broke!

It should be required reading for every citizen in this country. Deficits, on the other hand, are a huge problem that we must address.

http://www.nytimes.com/2004/03/26/opinion/26KRUG.html

It has become standard practice among privatizers to talk as if there is some program called Socialsecurityandmedicare. They hope to use scary numbers about future medical costs to panic us into abandoning a retirement program that's actually in pretty good shape. But the deteriorated outlook for Medicare says nothing, one way or another, about either the sustainability of Social Security (no problem) or the desirability of private retirement accounts (a lousy idea.)

Even on Medicare, don't panic. It's not like a private health plan that will go belly up when it runs out of money; it's just a government program, albeit one supported by a dedicated tax. Nobody thinks America's highways will be doomed if the gasoline tax, which currently pays for highway maintenance, falls short of the system's needs — if politicians want to sustain the system, they will. The same is true of Medicare. Rising medical costs are a very big budget issue, but 2019 isn't a drop-dead date.
The trustees' report does, however, give one more reason to hate the prescription drug bill the administration rammed through Congress last year. If deception, intimidation, abuse of power and giveaways to drug companies aren't enough, it turns out that the bill also squanders taxpayer money on H.M.O.'s.

A little background: conservatives have never mounted an attack on Medicare as systematic as their effort to bully the public into privatizing Social Security. They do, however, often talk about Medicare "reform." What this amounts to, in practice, is a drive to replace the traditional system, in which Medicare pays doctors and hospitals directly, with a system in which Medicare subcontracts that role to private H.M.O.'s.

more...worth reading in its entirety

[flpoljunkie]

6. You might want to include this salient part...

http://www.washingtonpost.com/wp-dyn/articles/A25175-2004Mar25.html

In today's speech at Wayne State University in Detroit, Kerry will reiterate his call for the elimination of all tax breaks that encourage U.S. companies to locate operations and jobs overseas. For the first time, he will target a popular tax incentive, known as "deferral," offered to most U.S. companies that do business in lower-taxed foreign countries.

To soften the blow to corporations, Kerry will propose a one-time, one-year offer to tax at 10 percent any profits a company brings back to the United States and invests here, an expanded tax credit to companies that create domestic jobs, and a reduction in the corporate tax rate to 33.25 percent from 35 percent -- a 5 percent cut.

"The most salient feature, or at least symbolic feature, is the corporate tax rate cut," said Roger Altman, a top economic adviser to Kerry. "When is the last time you saw a Democrat propose a corporate tax cut?"

Gene Sperling, another Kerry economic adviser, said the tax cuts for business will be fully funded by the international tax changes.

[blondeatlast]

8. The ABKs will conveniently ignore that part, since it

doesn't suit their agenda.

[cetasika]

9. voodoo economics

I thought this shit was proven to be nothing but bullshit by Raygun.

[mobuto]

19. This isn't voodoo economics

Kerry wants to modify the tax structure to provide financial incentives for companies to keep jobs in the US and to remove the incentives for taking them away. That has nothing to do with supply-side ecoomics, which just assumes that if you give corporations money they'll just naturally hire more people. The second is bunk, the first is absolutely correct.

[cetasika]

26. do you comprehend the term supply-side?

using semantics won't change the fact that giving corporations "incentives" IS supply-side policy.
I see a lot of dishonesty around here with people trying to spin everything into a positive.

[mobuto]

27. No it isn't

If you just hand out fistfulls of cash to corporations and wealthy individuals, you are not creating incentives for them to do anything. You're just giving them money. The theory of supply-side economics assumes that they will use that money to hire more people and pay higher wages, but the facts indicate otherwise.

What Kerry's talking about is directly linking job growth to taxes. This could not be more different.

I see a lot of dishonesty around here with people trying to spin everything into a positive.

Don't be ridiculous. Kerry has always opposed supply-side policies. He opposed Reagan's tax cuts, he opposed George Bush, and now he opposes George W. The only people being dishonest are those who seize upon a misleading headline.

[Sparkly]

28. "incentives"

I don't see how every incentive of any kind is "supply-side economics." Incentives for keeping jobs in the US, incentives for small businesses to create new jobs, incentives for developing more energy-efficient and environment-friendly ways of working, etc... -- those benefit workers and consumers. I think of "supply-side" as favoring industry without any balance for workers/consumers. -? I'm not an economics major, though, so maybe I'm unclear on the term.

[markus]

10. This is precisely what some in our Party attacked Dean for doing

in Vermont.

<snicker>

Sorry, I'm over that now.

I'm generally opposed to giving tax breaks to business. I say give the tax breaks direclty to workers, which would have the consequence of allowing business to offer lower wage and benefit rates.

I'm for trickle up, not trickle down.

[flpoljunkie]

11. I think John Kerry is for both helping workers and creating jobs.

They are not mutually exclusive.

[Feanorcurufinwe]

15. It is necessary to have a job in order to be a worker.

[sandnsea]

17. No it isn't

Dean targeted state tax cuts to corporations that set up a specific insurance scheme with the main purpose being to avoid federal income taxes. Not the same thing at all. And I think people forget how many small, local businesses are corporations as well. The article says cutting the offshore tax credit targets those big multinationals, cutting taxes to all corporations generally means cutting taxes to your local body shop, florist, as well as some US start-ups and larger companies like Ben & Jerry's or something. I don't think Ben & Jerry's is outsourcing.

[ScreamingMeemie]

18. But I think IBM outsources, don't they. Vermont isn't all about Ben

and Jerry's. Picture Vermont without IBM. That was the purpose of Governor Dean's tax cuts. :hi:

[sandnsea]

31. Captive Insurance

I'm not talking about IBM, I'm talking about captive insurance. I never particularly cared about IBM, except to the extent Howard Dean was standing up their railing about Washington cockroaches supporting special interests when his tax incentives to IBM were the exact same thing. The word hypocrite comes to mind.

[ScreamingMeemie]

32. The words job protection comes to mine.

:hi:

[sandnsea]

39. Whose job? Howard's?

:hi:

[mzmolly]

16. Sounds like he's wanting to keep jobs in the US. Though I wish he'd

find another way, like charging large tax penalties for co.s that move jobs oversees. However, that may not be feasable under current laws.

None the less, I'd rather see jobs stay in the US, and while a corporate tax break doens't sound *palatable* I can live with it if the end result is JOBS!

[redqueen]

20. Nice balance

Hope he gets tougher once in office, though. :evilgrin:

[Scoopie]

21. This was Clark's plan

But, since the media never covered him, it looks new to you guys who weren't Clark fans.

*Sigh*

http://clark04.com/issues/jobcreation/

Tax Incentives to Keep Manufacturing Jobs in the U.S. General Clark supports current legislative efforts to keep and expand production in the United States. To that end, as President, Wes Clark would institute a 90-day review of all tax and spending provisions affecting large manufacturing firms with a particular focus on whether any tax and spending provisions provide manufacturing firms an incentive to move jobs overseas. As President, General Clark would support initiatives that could provide manufacturing firms the incentive to keep (and expand) manufacturing jobs in the United States.

[mobuto]

24. Yup, I know

Kerry's coopted almost all of Clark's message. From his economic plan, to his call for national service, Kerry's really going whole hog. I think that's a great thing - immitation is the sincerest form of flattery.

[sandnsea]

30. August 28 2003

I probably shouldn't do this because we're supposed to be unifying and all, but there isn't much you'll find any other candidate say that Kerry didn't say first and usually for years and years. It looks like he's expanded his tax incentives because we're losing jobs in all kinds of industries now, not just manufacturing.

Tax Breaks to Expand Manufacturing Jobs in the U.S. Over 2.7 million manufacturing jobs have been lost since President Bush took office. John Kerry will save jobs by ending the unpatriotic practice of U.S. corporations moving offshore simply to avoid paying their fair share of our nation’s tax burden. To create new manufacturing jobs Kerry will:

Get the Crane-Rangel-Hollings legislation enacted, which provides a corporate rate reduction to manufacturers who produce goods in the United States;

Propose a new jobs tax credit to encourage manufacturing companies to stay and expand in America. When a manufacturing company creates jobs above their 12 month average, the payroll taxes of the new employees will be refunded for two years.

Immediately restore and double funding for the Manufacturing Extension Partnership that President Bush slashed by 80%.

More:
http://johnkerry.com/pressroom/releases/pr_2003_0828.html

[cindyw]

33. Thanks for pointing this out.

There is really nothing Kerry said today that he did not say from the beginning. It becomes necessary to re-introduce your ideas over and over to overcome media and republican misinterpretation and lies.

[Bread and Circus]

48. Actually just about all the candidates had the same plans....

they all consulted the same specialists.

Really, if you go back and read all the different websites the plans were pretty darn similar with some notable exceptions.

Yes, Kucinich was a bit different and so was Sharpton/CMB but by and large all the plans were about the same thing.

The good news is: These are good plans for the most part.

[ajacobson]

38. The only thing Kerry hasn't coopted from WKC

was his ability to excite a crowd.

I was at the speech (I work at Wayne State University where the speech was held so I went and saw it) and JFK had a good message but Governor Granholm got the crowd going way more than Candidate Kerry did. That's a problem.

[TahitiNut]

55. Ahhh! My alma mater!

It's been a loooong time.

[Monte Carlo]

22. I think he's trying to compensate the high labor costs in the U.S....

... with a lower corporate tax rate here in the United States - partially, anyway.

These firms are shipping their HR departments over to India and China and other countries for one reason; capable labor at a cheap price, THAT'S IT.

This is supply-side economics, no doubt, but there's nothing necessarily wrong with that. The problem with Reagan was the total over-emphasis he placed upon it.

[MoonRiver]

25. I can live with Clinton redux.

Times were so good under Clinton. Please, Kerry bring them back!

[TahitiNut]

36. "costs" to whom??

This is what happens to people's minds as the pathological meme-infected media hijacks language and thought itself. :shrug:

First of all, compensation cost/benefits of US labor are among the lowest in the world. US workers are more productive than off-shore workers. It's a myth that such "costs" are the predominant reason for off-shoring. The greater reason for off-shoring is the externalization of costs - infrastructure, pollution, and liability costs in particular.

More significantly, however, is the question of who increasingly is avoiding the costs which are externalized. As wealth becomes even more concentrated in the hands of fewer and fewer, such decisions serve narrower and narrower interests. It's no longer a question of valuing the labor of one's neighbors and countrymen, since the "valuation" power of wealth itself is no longer in the hands of the consumer or even the general public.

There is absolutely nothing taxed at a higher rate in this country than labor. The more labor itself is taxed, the less the worker actually receives for his or her work. That's the true compensation ... and it falls far, far short of the "cost" of labor.

[redqueen]

41. Thanks for this post

This kind of clarity on fiscal matters is essential if we are to avoid being screwed over for the rest of our lives.

[Zhade]

50. TahitiNut, you just keep making sense. I'm impressed. Great post!

NT!

[Nicholas_J]

23. The difference between Republican Tax ideas

And Democratic tax ideas, have always rested on one idea.

Republicans use the idea that tax cuts to the rich will inevitable result in the rich using the money that they get to improve their businesses, while Democrats insist on targeted tax cuts, giving tax incentives that direct the places in which the rich, and corporations must use the revenues they receive from tax cuts, while giving direct tax cuts to the poor and middle class, which they know will result in tax returns being directly spent on products or services that direclt inpact the economy.

What is essential is for Democrats do what they did during the fight over the 2002 Bush tax cuts. Have Nobel Prize Economists examine the Bush tax cuts too see which portions of the cuts have resulted in the current upturn in the economy.

A similar Analysis of the Reagan tax cuts showed that by and large, it was only the middle class portions of the tax cuts that had any effect on the economy, while the tax cuts that were directly given to large corporations were largely used to give corporate executives large raises, increased their stock options, and very little, less than five percent of the cuts to corporation were used for job creation or for plant improvement.

When the Democrats used to use the term, "Targeted tax cuts", this was what they were referring to, but it is fairly obvious that when it comes to tax policy, most Americans need finger puppet explanations, and Kerry's explanation of his policies are starting to reach that level. A simply, I will give corporations tax cuts for creating new jobs, is a "Targetted Tax cut" but now it seems that the public is starting to get the idea.

[Leilani]

34. I missed the first part of the speech

but what I heard sounded good to me.

A Pres. Kerry will have Congress to deal with, but it's the GENERAL direction of things that is important, not specifics.

He was sending a message to Wall Street: I'm safe, & not some wild radical. This speech begins to dismantle Bush's attack on Kerry as someone to be feared in the economics sense.

And it's a signal that he will go back to reasonable economics a la
Clinton: balanced budgets, job creation, etc.

All in all, a great start. Remember, many people don't know Kerry, & this is a good introduction.

[LynneSin]

35. I'm really digging this idea

I've been on the fence with supporting Kerry (don't get me wrong, I was going to vote for him but it was kinda half-hearted), but I like this plan.

Tax Cuts should be created as a reward for corporations that stay in this country and hire Americans - end of discussion. You want to go overseas and hire cheap labor, then you should NOT be rewarded with cheaper taxes. I also think Kerry should go a step further and offer additional tax cuts for companies that make changes that would benefit the environment? What if we gave tax credits to companies to refit their plants with renewable energy resources? Or to car companies that build cars that on an average have higher CAFE standards.

Here's a great one - how about giving tax credit to those who buy energy efficient cars instead of those who buy mongo-sized, gas-guzzling SUVs. Let's face it, I'll be able to afford a Prius much sooner than an expensive gas-guzzling SUV, a tax like that would benefit myself and other middle class folks!

[Zhade]

51. I especially agree with your last paragraph.

Why should planet-killing (at a faster rate, anyway) SUVs get their owners any sort of reward at all? I actually think consumer SUVs should be more heavily taxed than more fuel-efficient vehicles - to help pay for the environmental clean-up, if nothing else.

[TahitiNut]

37. "10 million jobs by 2009" will still be about 12-15 million jobs too low

The greatest damage done by the Busholinis has been to the economic enfranchisement of the American public. Not only do we pay 50% more for less health care than other countries, the Busholinis have disenfranchised more than 10% of working age people in this country. This is a recipe for economic disaster.

[Thrill]

40. This plan will play well

in places like South Carolina and Ohio

[Bill Todd]

42. Is anyone here actually conversant with economics?

If so, I have a few questions which I posted in response to an earlier instance of this topic (before the original post here appeared), and I'm still curious (so please forgive the replication):

So under the new plan, profits from off-shore subsidiaries will be taxed as they occur, rather than only when brought back into the U.S. And this will supposedly create 10,000,000 jobs here in 4 years, and at the same time generate $12 billion in additional annual tax revenue.

Why does this sound much more like Bush's rosy fiscal projections than something that would come out of, say, the CBO? Why do I suspect that if it actually did generate all those jobs, it would be because it caused companies to create jobs here to replace jobs overseas, in which case the $12 billion in additional tax revenue would then drop to something far less impressive? Am I just being too skeptical here?

But even if I suspend my disbelief in both areas, I'm then struck by the use to which this $12 billion will be put: not to social programs, not to deficit reduction, not to low-income tax relief - but to reducing the normal corporate tax rate by 5%.

Corporate tax relief? Don't I remember (bear with me here: I'm pulling these numbers out of a dim recollection of something I read a while ago somewhere I can't remember...) that corporations contribute a lower proportion of our national tax revenue today than in many decades - something like 10% now, vs. 30+% in the '60s? I'm not inherently anti-corporate, though I do have some problems with an increasing amount of the corporate conduct that we've seen over the past decade or so, but it doesn't seem to me that further reductions in already significantly reduced corporate taxation should be at the top of the list of uses to which any additional cash should be put.

It sounds as if Kerry has gotten the message that jobs are a real issue. However, it's not clear why this change in taxation should actually affect job-creation to anything like the degree which he claims. And it's also not clear why it should produce both such vigorous job-creation and major additional on-going tax revenue. And why any such (potentially decreasing) additional revenue should be devoted to a general reduction in the corporate tax rate simply defies explanation.

All you Kerry enthusiasts, help me out here. I really do support elimination of overt incentives to out-source and therefore would support the proposal to stop deferring taxation on off-shore profits - but the rest just doesn't make much sense to me, especially the part where the putative additional (and possibly declining) revenue is converted into a permananet corporate tax break.

- bill

[TahitiNut]

43. Simple. Ten million more jobs means 10 million more taxpayers.

$12 billion divided by 10 million jobs = $1,200/job in net taxes ... not only the direct taxes (on earnings) but in the indirect taxes as those net incomes are spent. (It must be noted that labor income is taxed at the highest total rate. Higher than investment income; higher than inheritance income; higher than any other kind of income.)

Wasn't that easy? :shrug:


I'm always a bit perplexed that folks don't keep in mind that there's a "supply side logic" to labor, too. If it makes sense to lower taxes on the wealthy to "create" jobs, why doesn't it make sense to lower labor (real earned income) taxes on workers to increase their (net) compensation??? Then, when they spend it, jobs are "created"! (I have far more faith in American workers to spend money to create jobs in this country than on the wealthy who spend their money to create jobs in China.)

[Bill Todd]

44. It's usually easy to provide an answer if it doesn't have to be right

The promised 10 million jobs won't finish materializing until 2009. The promised $12 billion in additional revenue is presumably immediate (and therefore derived from ceasing to defer taxation on off-shore profits, not from taxing those hypothetical jobs some time down the road) - because it's being used to justify the immedate reduction in corporate tax rate.

So my questions pertained to whether generating an additional $12 billion in tax revenue from ceasing to defer taxation on off-shore profits while at the same time generating over time an additional 10 million jobs as a presumably indirect result of this change in tax policy was a realistic estimate of what the change in tax policy would actually produce, and to why the additional tax revenue (whatever it might actually be) should be given back to corporations when they are currently contributing less to tax revenues than at any time in my memory.

Edit: By the way, if the proposal actually is relying upon those hypothetical increased tax revenues from those hypothetical new jobs to offset the immediate $12 billion reduction in corporate taxes by reducing corporate tax rates 5%, one might observe that this bears a disturbing resemblance to other tax policies in recent memory which have justified tax cuts today (for those who arguably don't need them) on the basis of rosy projections of future economic consequences thereof.

- bill

[mobuto]

46. The 10 million jobs figure

may or may not be accurate. Projections are always fuzzy and you've got to remember that Clinton promised more jobs in 1992, and more jobs in 1996, and both times the Republicans accused him of overpromising, and each time he blew away his own rosy projections. My own guess is that a Kerry Administration would create more than 10 million new jobs. But that really isn't the question because we won't know until we do it. The question is whether Kerry's program makes sense. And it does.

So my questions pertained to whether generating an additional $12 billion in tax revenue from ceasing to defer taxation on off-shore profits while at the same time generating over time an additional 10 million jobs as a presumably indirect result of this change in tax policy was a realistic estimate of what the change in tax policy would actually produce, and to why the additional tax revenue (whatever it might actually be) should be given back to corporations when they are currently contributing less to tax revenues than at any time in my memory.

Again, economic forecasting is a murky art and not one I'm going to venture into. Anybody who tells you with any degree of certainty that they know exactly how many jobs will be created by any program is either a fool or a liar. But the point is this. The $12 billion in direct tax revenue is really immaterial -- in macroeconomic terms, its just not a lot of money at all. The only relevant result is that it shifts the balance of cost competitition towards American workers and, by cutting corporate taxes elsewhere, Kerry eliminates the cost to corporations -- who would otherwise oppose this. So corporations don't lose money and American companies have a stronger incentive to employ Americans. The net benefit to the economy of more jobs is obvious - and tax revenues will increase. Why? Because Americans spend their money in the United States, because employed Americans don't commit crimes, because employed Americans are much less likely to be on MediCare or Medicaid, because property values will rise, etc. And that $12 billion is less than what the Department of Defense will spend on Unmanned Aerial Vehicles alone next year.

[Bill Todd]

52. I'm afraid that's not very reassuring

On the one hand, we have a 5% cut in the corporate tax rate. Now, while all the other numbers may be kind of vague and hypothetical, you can be reasonably sure that this one is not - because total annual U.S. corporate profit should be a very solid number to work with: if Kerry claims that the proposal is revenue-neutral, as he does, then this cut will be a $12 billion corporate tax cut.

To offset it, we have the claim that ceasing to defer taxation of off-shore profits will generate a compensating $12 billion in new tax revenue - an assertion which you admit is soft at best, and is clearly dependent on future corporate behavior as well - e.g., whether corporations alter their off-shore activities in response to this change in tax policy, which one might suspect is exactly what Kerry expects and is the rationale behind his claim that some 10 million new jobs will be created thereby (in which case, as I noted, the $12 billion in expected tax revenue will be commensurately decreased, while the $12 billion 5% tax cut will chug right along at full throttle, resulting in a net corporate tax reduction of some magnitude from a level which is already the lowest in decades).

You claim that Kerry's proposal 'makes sense', without advancing an iota of evidence to support this claim. I claim that only the portion of the proposal that eliminates the ability to defer taxes on off-shore profits makes sense: the rest sounds extremely dubious. Not only does it sound like a net corporate tax cut, as explained above, but the 10 million new-job number sounds ridiculously high (sure, I hope that a Kerry administration will create 10 million new jobs, as you said, but the claim is that this program alone will do so, and that sounds like pure bullshit). And there are without question far better uses to which any increased tax revenue from the non-deferred taxation of off-shore profits can be put.

In other words, what we have here sounds like a minor net corporate tax cut that may have very little effect in and of itself on creation of U.S. jobs (my guess would be that it will at best slow down the out-flow of jobs a bit). But it's being touted as a 'jobs proposal'. Remind you of anyone we know?

- bill

[TahitiNut]

54. "the 10 million new-job number sounds ridiculously high"?? Nonsense!

That's an increase over current (seasonally adjusted) employment levels of approximately 7.66% in 48 months (4 years). Since 1951, the monthly employment figures have represented a greater than 7.66% growth in jobs 61% of the time. At the beginning of the Busholini mal-adminstration, we exceeded that 48-month growth 63.5% of the time!

Since 1951, the average 48-month growth in jobs has been 8.4%! As of last month (February 2004), there were only 1.25% more people employed than 48 months previously. We reached a high of 132,507,000 jobs in March 2001 and have almost constantly declined ever since.

The Busholinis lowered the bar. We're currently already 10 million jobs below the average rate of growth in jobs for the last 50+ years .. a growth that's mostly attributable to mere population growth!

I hate to say it, but 10 million more jobs in the next 4 years still doesn't undo the economic damage of the Busholini years. It's the anti-Lake-Wobegon; it's below average! It merely perpetuates the Busholini job loss for four more years.

[Bill Todd]

58. Before you call a statement 'nonsense'

it would probably be a good idea to have some minimal understanding of what it said.

- bill

[sangha]

56. You're leaving an important part out

Kerry's proposal includes a provision for a one-year period during which corporations can "repatriate" their overseas moneys by bringing it back into the US and those moneys will be taxed at a lowered rate. This is expected to bring in billions in tax revenues, and without further researching it I have a strong suspicion that this is where the $12B figure is coming from.

After all, Kerry's proposal regarding the corporate tax rate is supposed to be revenue-nuetral so I don't see how that's going to bring in the $12B.

[sangha]

57. From Kerry's website

"John Kerry will fundamentally reform America's international tax system, eliminating tax breaks for companies that create jobs overseas and using the approximately $12 billion in annual savings to cut the corporate tax rate"

As I read it, it means that there isn't going to be a net of $12B annually. Instead, the $12b that is saved by taxing corps overseas money will be invested in lowering the corporate tax rate.

[Bill Todd]

59. Now perhaps you'd be good enough

to explain exactly how the statement on Kerry's Web site differs from my characterization of that aspect of his proposal - save for my question of whether the claimed increased tax revenues may well decrease over time as corporations adjust their behavior, while the 5% across-the-board tax cut will just chug along forever, and increase in impact as the economy grows.

In other words, while Kerry's proposal may be revenue-neutral on average to corporations today (still hardly a ringing endorsement for it compared with alternative uses for any added tax revenue), it may well result in loss of tax revenue (i.e., an absolute corporate tax cut) down the road.

- bill

[sangha]

60. I cannot, so I will not

I think most people here understand how it's impossible to predict the future of the economy. Luckily, our tax code is not written in stone, and should revenues fall below expectations, rate can be changed.

However, wrt Kerry's plan, I think you have missed the central element of Kerry's plan, which is that by lowering our corporate tax rates for corps that make their money here and raising the tax rates for corps that make money overseas, they are increasing corporate incentives to hire workers here in the US.

IOW, when you speak of behavioral changes on the part of corps, those changes will be the ones that Kerry (and we) want to encourage - hiring here in the US.

[Bill Todd]

61. Sorry if I inferred that you had provided the Kerry site quote

as some kind of attempted rebuttal - I just didn't understand what other purpose it could have had.

However, you continue to miss the point. I approve of the change in tax policy with respect to off-shore profits, for exactly the reason you mention. But coupling it with an across-the-board 5% cut in the corporate tax rate offers no additional incentive in this area whatsoever, contrary to what you appear to be suggesting: it just lowers taxes for all corporations, including those affected by the off-shore policy change.

Now, I suppose that you could assert that a 5% cut in the corporate tax rate, taken in isolation, might help keep corporations from moving off-shore lock, stock, and barrel - but a larger cut would of course be even more effective in this area, and the real question is whether there should be any cut at all given that the percentage of tax revenue derived from corporate taxation is already at historical lows (only about 10% today, vs. around 30% a few decades ago).

In sum, there are two questions here, and they are not intrinsically connected:

1. How to discourage off-shoring by U.S. corporations. The change in off-shore profit tax policy addresses this, at least to some extent (how large or small I can't say).

2. How the overall tax burden should be divided between corporations and individuals. One might expect a Democrat to be trying to move this balance back a bit toward its historical average, rather than to be advocating an across-the-board cut in corporate taxation that will at best keep it where it is now and may actually worsen the situation.

- bill

[sangha]

63. response

But coupling it with an across-the-board 5% cut in the corporate tax rate offers no additional incentive in this area whatsoever, contrary to what you appear to be suggesting: it just lowers taxes for all corporations, including those affected by the off-shore policy change.

I disagree. The %5 cut (btw, I think it's only a 2.5% cut, but I could be wrong) will encourage less outsourcing. Granted, it's no panacea, but it's something.

wrt your questions

1) You're right. It's not much, and we do need to do more. Without going into detail, IMO what we really need is a new industry that creates new jobs. IMO those should be energy conservation technoology and medical technology. We can't just depend on manufacturing or service jobs anymore. The developing world is developing, and in a head to head competition we will lose due their labor rate advantages.

2) On this I agree with you. However, I would point out that the rate structure is not the only way to shift the balance. Equally important are the rules and regulations which dictate when and how revenues and expenses are identified. IOW, while your concern here is an important one, there is more than one way to skin a cat.

In conclusion, I'd also like to suggest that this policy should be seen as being as much about campaigning as it is about tax policy. I think it's meant more as a message concerning what Kerry's priorities will be (and contrast that with Bush*'s silence on outsourcing) and not as the final word on tax policy.

[Hippo_Tron]

62. Yes, assuming they aren't 10 million minimum wage jobs...

But then again it's better than 10 million people on welfare.

[Zhade]

49. How many corporations actually pay taxes these days?

Two? Three?

Isn't that why all the corporateers are banking offshore - to avoid paying taxes in the first place?

[sangha]

64. Most do

According to the NY Times, this will increase taxes on about 6,000 corporations with income overseas. I forget that exact number, but it was a small, one-digit, percentage of the total # of corps.