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New Business Taxes = U.S. Jobs and Economic Growth

Summary: Two new taxes are proposed to replace present business taxes. A small flat tax assures businesses pay for general benefits they receive from publically financed functions. A value added tax (VAT) that is zero or small for value added within the U.S. and higher for value added offshore will drive investments and jobs to the U.S. and keep U.S. businesses globally competitive.

Taxes and other costs, i.e., regulations, entitlement mandates, and wages, are driving large and small U.S businesses to move functions, jobs, and profits offshore. Today’s U.S. corporate taxes constituting 15% of all tax revenues are the highest in the industrialized world, and new personal income tax rate increases will hurt many small businesses. Business taxes cannot and should not be used to solve our fiscal problems. Strategically lowering taxes on businesses will create job and economic growth opportunities within the U.S.

Some taxes on businesses are appropriate since businesses too benefit from many publically financed functions, but today’s taxes are counterproductive. A small flat tax (e.g., ten percent) paid on profits assures businesses contribute to infrastructure and other government provided benefits they receive. A goods and services value added tax (VAT) based upon where the value is added provides a “level the playing field” for jobs and investments in the U.S. The VAT for value added within the U.S would be small or zero, and the VAT for offshore value added would be significantly larger. Tax offsets and exemptions for paying foreign taxes, research in the U.S. and similar exemptions should continue only if they satisfy the goal to create job and economic growth opportunities.

Replacing the present business taxes with a flat tax and a selective VAT would significant change U.S. businesses’ investment and labor models. This business two-tax system would quickly drive millions of manufacturing and skilled labor jobs to the U.S., increase revenues to eliminate our deficits, reduce the U.S.’s trade imbalance, and put our nation on a sound foundation for future growth. Any business tax revenues lost would be more than offset by taxes paid by more working citizens.

Negative impacts should be minimal. Costs for offshore goods and services to U.S. citizens may increase slightly, but would be more than offset by U.S. jobs. Some U.S. businesses will lose their exemptions, but should have less political uncertainty, and be more competitive worldwide. Government revenue uncertainties may require “tweaking” to optimize job and economic growth opportunities, and assure the new taxes provide expected tax revenues.

Today our nation’s future looks bleak. With tax changes, spending cuts and controls, and technology advances, i.e., gas and oil energy independence due to hydraulic fracturing technology, the future can become wonderfully exciting again. Adoption of this principles-based tax system for businesses will help jump-start future jobs and economic growth.

Tags: Politics, Taxes, US, crisis, debt, deficit, economic, jobs, national, policies, More…political

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Contributor Comment by Laurence Lynn Cleland on February 9, 2013 at 12:17pm: Jim:

I agree businesses pay a lot of taxes when state and local taxes are included. I only addressed federal taxes and assume all existing federal taxes are null and void.

Comment by June Gagnon on February 8, 2013 at 10:59pm: Jim Lieber - Oh, but businesses DO pay taxes; they pay employee FICA tax (matched funds), they pay state unemployment taxes, if a private owned business, the owner pays "personal income taxes"; and then you have all the insurance and licensing fees (taxes) for the "privilege" of owning/operating a business; if you happen to own the property, you pay property taxes to your local municipality, if you operate as a corporation, then you pay a fee (tax) to your state to license that corporation, so don't try to tell anyone "businesses do not pay taxes"! Business owners will laugh you off the stage. (Been there, done that)!

Contributor Comment by Laurence Lynn Cleland on February 7, 2013 at 12:01pm: Harrill:

I agree history shows low business taxes correlates with economic growth, but how do we get out of the hole that career politicians have dug without some taxes?

Comment by Jim Lieber on February 7, 2013 at 11:56am: Oh, dear! Debrajo, BUSINESSES DO NOT PAY TAXES. It is the final consumer who pays all of the cumulative taxes that were levied throughout the production process. That includes property taxes, sales taxes, employment taxes, tax taxes ad nauseum. Businesses should not pay ANY taxes except for local police and fire protection for the physical assets. It is not the business that derives anything from the publicly provided benefits but the employees of that business. A business is an inert object.

Businesses are tax collectors, not tax payers. And they are not reimbursed for their time and expenses, either.

Comment by Harrill Rockett on February 7, 2013 at 9:41am: @Laurence Lynn Cleland. Me thinks, you need to go back and restudy American Economic History. It was a 5 hour course when I took it at OU and I made an A in it. The point being, the greatest time of economic development was during a period when their where no taxes. At this point in time, it may not be politically possible to create jobs and growth. Our present welfare state has destroyed the initiative to work and accumulate. One needs to have the desire to provide for their family first , then to accumulate wealth.

Today's employee wants a job that pays a high salary with the minimum amount of effort or work and an early retirement with the same amount of pay. Thus, the ranks of entrepreneurs have decreased, these are the job creators. What has happened? People who have been employed and then decide they want to be an entrepreneur want to take their 40 hour work week, with paid vacation, hospitalization,etc. with them as an entrepreneur. It can not be done. Being an entrepreneur requires a 7 day week plus nights, thinking about their business if not working at it. Their benefits have gone out the window if they can not make the money immediately to provide them. Most of the time it takes several years to build a business up to the point of equaling their old job benefits.

So, the solution is to get rid of our present welfare state, then people will be willing to put forth the effort to provide for their family and accumulate wealth.

Comment by Harrill Rockett on February 7, 2013 at 9:13am: Well Debrajoe, If your Congressional friends avoid you, it is time to get new ones. I dislike any office holder who does not do what they say they will or who is on the other side of the fence from me. As a conservative, that means I may not like a lot of them, even if they do what they say they will.

Contributor Comment by Laurence Lynn Cleland on February 7, 2013 at 2:05am: I am pleased so many of you responded. Dialog amongst we conservatives is needed on this timely issue. My goal was to “create jobs and economic growth opportunities in the U.S." My proposed two-tax system that replaces ALL federal (corporate and small) business taxes should reduce taxes for all businesses.

The negative responses to my proposal suggest the conservative position on businesses is zero taxation. It is clear zero corporate taxes are possible, but it is not clear what this means for small businesses or that it will create U.S. jobs and significant economic growth. So, let’s have a dialog about what we believe is need and politically possible to create jobs and growth. Then we can collectively strive to achieve change.

What do you suggest as our position?

Comment by cary henderson on February 6, 2013 at 6:46pm: There is no excuse for any taxes on business. Why don't so many people get this fact? Any tax on business no matter where it is collected or on what is just a tax on the people in the form of higher prices. The FairTax ends this hidden taxation. Any other change will hurt America's competetive edge, like we have one.

Comment by Debrajoe Smith-Beatty on February 6, 2013 at 6:25pm: LOL - Harrill no they don't tell me that any more. They know that I am on to them. They try to avoid me.

Comment by Harrill Rockett on February 6, 2013 at 6:19pm: What is wrong Debrajoe? Don't you trust those good old boys up there in Washington? You know they are just your friends and neighbors you sent there to do the job they promised to do for you. Wvery time they come back home and see you on the street or where ever, they tell you hard hard they are working for you but that it is almost impossible to get it done in such a short period of time. They are just going to have to have another term maybe more than one more to get everything done. You are only paying them over 150,000 dollars a year to do it plus a Cadillac health policy and they get to keep all of that when they retire too.