When I first criticized the Democrats’ spendthrift “stimulus” now over two years ago, some readers faulted me for not recognizing the severity of the downturn and favoring a do-nothing approach. While to be sure, I felt the executive branch should, as it were do “nothing,” I thought the legislative branch should act speedily to reduce the burdens it had placed on private enterprise. Instead of increasing federal spending, I would have cut it substantially, eliminating some federal agencies while reducing the scope of others.
I would have have set advisors to work on a plan to shut down Fannie Mae and Freddie Mac, ending the need for further federal oversight of these government-sponsored enterprises (GSEs). And I would have cut the corporate tax rate, believing that the higher percentage enterprises keep of their profits, the more they can invest in innovation and expansion, investments which generate growth and create jobs.
Now, it appears, we’re heading the opposite direction. Instead of our tax rate going down, in fewer than three weeks, the United States will have the world’s highest corporate tax rate. While Japan’s is currently higher, on April 1
. . . both Japan and the United Kingdom are scheduled to lower their rates as well. Japan is planning to reduce its national rate by 4.5 percentage points, which will bring its overall rate to below 35%. The U.K. rate will fall from 28% to 27% as a first step of a multi-year plan to lower the British rate to 24% by 2014.
Writing for the Cato Inistute, in an analysis of the U.S.’s new status, Duanjie Chen and Jack Mintz from the University of Calgary’s School of Public Policy, University of Calgary point out that a policy makers recognize “that the U.S. corporate tax system is a major barrier to economic growth“:
The aim of corporate tax reforms should be to create a system that has a competitive rate and is neutral between different business activities. A sharp reduction to the federal corporate rate of 10 percentage points or more combined with tax base reforms would help generate higher growth and ultimately more jobs and income. Such reforms would likely lose little, if any, revenue over the long run.
To be sure, we’d hear the usual suspects complaining that we were cutting taxes on the rich, but if those pressing for the changes pointed out how many of the people paying those taxes are businesses which are often the lifeblood of local communities and how the lower rate helps make American companies more competitive with their foreign counterparts, the American people would reject their classist rhetoric.
But then again, I wasn’t elected and the man who was has to take responsibility for the anemic recovery, far less robust (far, far less) than most economic upturns after a recession.