A Simple Solution for America’s Economic Woes
By Dr. Arch Barnes – Feb 1, 2011
The US Federal Government currently collects in taxes and fees a little more than two trillion dollars per year… (based on 2009 data). Nearly half of this comes from personal income taxes, another third from payroll taxes (including SSI). About eight percent comes from corporate income taxes (about one-hundred and fifty billion dollars annually). The rest comes from a multiplicity of excise fees and tariffs, etc.
I have long argued that the corporate income tax is merely a ruse by the government to get more money from the public. Any such taxes paid by corporations is merely added to their cost of doing business, naturally enough, and is reflected in their prices, so the consuming public ultimately pays for it. But such a tax gives pontificating politicians the opportunity to make inane claims about corporations paying their “fair share.”
So I propose the elimination of all corporate income taxes.
What would happen if we did this?
Well, almost immediately, there would be a wide-scale lowering of prices. How so?
More than half our GNP (actually about eight trillion dollars per annum) is in the form of transactions purely domestic. This means that if there were no corporate income taxes the potential price reduction across the board for domestic products would be eight percent. Sounds good, right? But it would actually be far more than that; here’s why:
In the chain of transactions from raw materials to finished goods there are many players, sometimes a chain can have as many as six or eight direct and dozens of incidental players. Less than one third of an automobile, for instance, is made by the company whose name appears on the car; dozens of suppliers make most of that car. Envision the raw materials process, say mining for iron ore. There’s the in-situ property owner (where the ore is located. And often this is the US government itself), then there’s the mining company, then the transportation company (could be a railroad, say) and the smelting company and the steel mill. The steel produced may be sold to an automotive company or other manufacturer of washing machines, industrial good, or you name it. If all of the companies represented in this chain, and all their suppliers of goods and services, have zero income tax to pay the savings multiply exponentially and final prices at the consumer end of the chain would be drastically lower. But let’s be conservative and use just a twelve-percent drop.
What would be the effects of this?
Well, first of all the uninformed and the “progressives” would scream bloody murder. They would say that the “Fat Cats” are getting fatter. Then the politicians would cry the blues, with all their usual rant. But consider the consequences of a twelve percent drop in the price of American-made goods across the board. What would that do?
An immediate up-tick in exports, because of improved competitiveness.
An immediate spike in consumption, people taking advantage of the lower prices.
A return to unemployment levels below six percent.
A sizeable jump in tax revenues to the states from sales taxes.
Lowering the cost of government unemployment compensation costs.
A ten percent increase in payroll taxes.
A ten percent increase in personal income taxes, federal and state.
A large increase in fuel consumption, with attendant revenues to all governments.
More people paying into the SSI and other struggling govt. programs.
A ten to fifteen percent surge in stock market prices immediately, with continuing gains as the full effects are felt throughout the system, resulting in an increase in the national net worth, the strength of the dollar AND big increases in personal income taxes from this growth alone.
And, best of all, a huge increase in national confidence!
But what if the greedy capitalists didn’t pass on the lower costs to consumers, you might ask. Well, then their profits would escalate drastically. Corporations are not in business to just hold money; they would invest their earnings. Either in their own growth and development or in some other entity… and such investment would be just as stimulative (and just as repressive of inflation) as the alternative scenario but with one added advantage: Stock prices would then really surge, with attendant gains for governments and the public.
At present, the US has among the highest corporate income tax rates in the world.
In the last fifteen months the US government has thrown more than a trillion dollars into a so-called ‘stimulus” effort that has done very little, has wasted huge sums on pet projects that have little or no stimulative effect. Furthermore, these funds have been distributed unequally to favor small sections of society based on political pay-back.
The elimination of corporate income taxes would have produced a far larger beneficial and longer-lasting effect at far lower cost… and in fact it would have produced net increases to the federal coffers, reduced the national debt and the attendant debt service costs we all must endure.
It is my contention that this single move, eliminating corporate income taxes, would yield tremendous benefits, would more than pay for itself in very short order by stimulating the economy directly and powerfully, as shown.
By Dr. Arch Barnes – Feb 1, 2011
The US Federal Government currently collects in taxes and fees a little more than two trillion dollars per year… (based on 2009 data). Nearly half of this comes from personal income taxes, another third from payroll taxes (including SSI). About eight percent comes from corporate income taxes (about one-hundred and fifty billion dollars annually). The rest comes from a multiplicity of excise fees and tariffs, etc.
I have long argued that the corporate income tax is merely a ruse by the government to get more money from the public. Any such taxes paid by corporations is merely added to their cost of doing business, naturally enough, and is reflected in their prices, so the consuming public ultimately pays for it. But such a tax gives pontificating politicians the opportunity to make inane claims about corporations paying their “fair share.”
So I propose the elimination of all corporate income taxes.
What would happen if we did this?
Well, almost immediately, there would be a wide-scale lowering of prices. How so?
More than half our GNP (actually about eight trillion dollars per annum) is in the form of transactions purely domestic. This means that if there were no corporate income taxes the potential price reduction across the board for domestic products would be eight percent. Sounds good, right? But it would actually be far more than that; here’s why:
In the chain of transactions from raw materials to finished goods there are many players, sometimes a chain can have as many as six or eight direct and dozens of incidental players. Less than one third of an automobile, for instance, is made by the company whose name appears on the car; dozens of suppliers make most of that car. Envision the raw materials process, say mining for iron ore. There’s the in-situ property owner (where the ore is located. And often this is the US government itself), then there’s the mining company, then the transportation company (could be a railroad, say) and the smelting company and the steel mill. The steel produced may be sold to an automotive company or other manufacturer of washing machines, industrial good, or you name it. If all of the companies represented in this chain, and all their suppliers of goods and services, have zero income tax to pay the savings multiply exponentially and final prices at the consumer end of the chain would be drastically lower. But let’s be conservative and use just a twelve-percent drop.
What would be the effects of this?
Well, first of all the uninformed and the “progressives” would scream bloody murder. They would say that the “Fat Cats” are getting fatter. Then the politicians would cry the blues, with all their usual rant. But consider the consequences of a twelve percent drop in the price of American-made goods across the board. What would that do?
An immediate up-tick in exports, because of improved competitiveness.
An immediate spike in consumption, people taking advantage of the lower prices.
A return to unemployment levels below six percent.
A sizeable jump in tax revenues to the states from sales taxes.
Lowering the cost of government unemployment compensation costs.
A ten percent increase in payroll taxes.
A ten percent increase in personal income taxes, federal and state.
A large increase in fuel consumption, with attendant revenues to all governments.
More people paying into the SSI and other struggling govt. programs.
A ten to fifteen percent surge in stock market prices immediately, with continuing gains as the full effects are felt throughout the system, resulting in an increase in the national net worth, the strength of the dollar AND big increases in personal income taxes from this growth alone.
And, best of all, a huge increase in national confidence!
But what if the greedy capitalists didn’t pass on the lower costs to consumers, you might ask. Well, then their profits would escalate drastically. Corporations are not in business to just hold money; they would invest their earnings. Either in their own growth and development or in some other entity… and such investment would be just as stimulative (and just as repressive of inflation) as the alternative scenario but with one added advantage: Stock prices would then really surge, with attendant gains for governments and the public.
At present, the US has among the highest corporate income tax rates in the world.
In the last fifteen months the US government has thrown more than a trillion dollars into a so-called ‘stimulus” effort that has done very little, has wasted huge sums on pet projects that have little or no stimulative effect. Furthermore, these funds have been distributed unequally to favor small sections of society based on political pay-back.
The elimination of corporate income taxes would have produced a far larger beneficial and longer-lasting effect at far lower cost… and in fact it would have produced net increases to the federal coffers, reduced the national debt and the attendant debt service costs we all must endure.
It is my contention that this single move, eliminating corporate income taxes, would yield tremendous benefits, would more than pay for itself in very short order by stimulating the economy directly and powerfully, as shown.