How High Business Taxes Hurt America

(TNS) -

Get in front of progressives, which the American public does daily, and watch out for their punches. You want higher prices? They’ll deliver the uppercut with a smile. Fewer jobs? You bet. Stagnant wages? They will give you those, too. It’s all done under the disguise of caring, when in fact, it is semi-socialistic bamboozlement of the kind we see in corporate tax policy.

Many other offenses could be chosen, ranging from regulatory overkill to cheerleading for debt doom, but this one happens to be in the news right now. The great big American drug company called Pfizer Inc. plans to merge with a Dublin-based company called Allergan PLC and set up headquarters overseas, thereby legally becoming an Irish company. There are certain, generally misunderstood, tax advantages that will also flow to the public.

If the merger goes through, Pfizer will keep paying U.S. corporate taxes for money earned here. It will get a new deduction opportunity, however, and will not have to pay U.S. taxes on foreign-earned money shipped back to the states.

This so-called corporate inversion will be a public plus for an obvious reason cited by Pfizer: The firm will have more cash to spend in America on investments that habitually sprout opportunities. Progressives, tending to think what’s good comes only from government, don’t get it and are wringing their hands.

They don’t like absolutely crucial corporations much to begin with, and that along with their statist enthusiasm is one reason we have a 35 percent corporate tax rate. It sadly out-distances other rates in the developed world. Officials overseas, even including many of the most ardently socialist, recognize that high rates damage international competitiveness and otherwise lend droopiness to an economy. Keep taxes reasonable and profits go up, wages go up and — guess what? — the generated cash makes government revenues go up.

The progressives argue back that our system is ridden with exemptions, enabling vast numbers of corporations — hardly all — to pay less than the 35 percent. Here is actually an economic boost of a kind, but through the wrong method, and the answer is definitely not to raise rates, which would hurt one and all. The answer is to reform a tax system that engenders avoidance and political gamesmanship with political cronyism, cumbersome complexity and still thievish hits on business.

Despite cries to the contrary, the taxes take from the public in varied ways, most obviously in higher prices, than it would if businesses had a higher net income. Business expansion is hurt because of less capital income for investment, as has been pointed out by Robert J. Barro, a Harvard economist who thinks we’d be better off with no corporate income tax at all.

As a matter of practical politics, the tax won’t disappear, but it is imaginable that Congress would lower the rates significantly and get rid of the least justified exemptions, prompting uplift in both revenue and the economy. The last thing needed is politicians such as Democratic Sen. Elizabeth Warren from Massachusetts demonizing corporations and raising rates, a means of picking the public pocket still more. It never seems to occur to these sorts that they can get more money for truly worthy programs through lower tax rates and something else: getting rid of abject, demonstrable, widespread governmental wastefulness through truly earnest investigation and truly honest congressional voting.

The progressives are not the people’s friends, even as many are tricked into thinking so. Too many progressives, such as the current president, don’t blink an eye at shrinking the public’s democratic authority, spending money we can’t afford or crying out how something like the Pfizer-Allergan deal is unpatriotic. Actually, it serves America. What could serve us more is the right kind of reform.