Today, as percentage of gross domestic product, government spending is at a 60-year high while revenues are at a 60-year low. Balancing the federal budget and then reducing the national debt requires: (1) spending cuts everywhere, including major entitlement reform, and (2) increased government revenues. This essay will focus on the latter, revenue increases.
Sustainable revenue increases can only be achieved via private sector job creation and economic growth. The best single action toward this goal would be lower tax rates — especially capital gains, corporate and individual income tax rates.
Lower tax rates are exactly the medicine needed to (1) stimulate private sector investment, (2) boost job creation and (3) launch a much-needed economic recovery. Lower taxes, blended with job training as requisite for unemployment benefits, along with additional incentives for capital investment, would spur U.S. job creation, moving folks off unemployment rolls; making them instead working taxpayers; increasing tax receipts while reducing unsustainable welfare spending.
Higher tax receipts with less spending — not a bad idea, huh? Hmmm, didn’t the sadly ignored Simpson-Bowles Deficit Reduction Commission conclude likewise?
Lower taxes and a more business-friendly environment would decrease the flow of U.S. capital and jobs overseas. Let’s stop demonizing U.S. companies that set-up shops overseas (often essential to compete there) and instead eliminate all taxes on U.S. corporate profits made overseas, if these profits are repatriated and invested back in the U.S.
None of these profits will ever come back here if U.S. companies are required to pay another 35 percent in U.S. taxes to repatriate them. Note: the U.S. is the only industrialized country that prevents profits, once taxed by the host country, to move freely back home for re-investment.
Estimates of these profits being held and/or sadly being reinvested overseas range from $1.5 trillion to $2 trillion. That’s trillion with a "T."
U.S. companies just might turn the entire U.S. economy around by creating new U.S. jobs with these monies! Ya think?
Furthermore, let’s stop reviling profits of U.S. energy companies, which, by the way, are owned by their shareholders, "we the people." And let’s stop threatening everything imaginable to deter further exploration of U.S. energy resources which could reverse the entire energy picture and move America toward energy independence.
Let’s instead adopt policies to stimulate further U.S. job creation in domestic energy production; reducing the $700 billion we send annually to overseas energy producers, some of whom hate us.
Let’s approve Shell’s permits (blocked for two years) for Alaska’s shallow waters, and begin tapping Alaska’s 27 billion recoverable barrels of oil and 120 trillion cubic feet of gas that are not accessible because of federal government restrictions.
Let’s have the EPA un-block another project: the proposed TransCanada-U.S. XL pipeline; creating 10,000 high-paying U.S. jobs and allowing 5 million barrels/day of oil from a stable, reliable friend.
Let’s stop declaring U.S. oil company profits at 8 percent of revenues as obscene, when these profits as a percentage of sales are below Fortune 500 average profits. All business folks look at profits as percentage of sales. But our politicians look at them as billions of dollars, ignoring the U.S. energy companies’ enormous size and sales as necessary to compete in the global energy game. Politicians find it easier to demagogue billions of dollars rather than modest 8 percent profits.
Let’s consider these win-win recommendations (and end all obsessive fears of the "rich" getting richer). Let’s all understand that new wealth creation is a higher goal than redistribution of existing wealth. Paraphrasing Margaret Thatcher, let’s explain that "taxing the rich," the job creators, works only until the government runs out of their money.
New wealth creation, new jobs and sustainable private sector growth are the only solutions to our current economic dilemma. We need to create additional taxpayers, rather than discouraging investment and economic growth with higher tax rates. Lowering tax rates has worked every time it’s been tried. Think 1921, JFK, Ronald Reagan and, yes, George W. Bush (if we are look objectively at the 2002–2008 record of job creation and economic growth — before the real estate and financial services collapses, which had nothing to do with the so-called Bush tax cuts).
Please, Washington, lower tax rates, eliminate some taxes completely, adopt major tax reform, reduce regulations and then get out of the way. American entrepreneurs will then lead the way to private sector investment, job creation, economic growth and soon increased tax receipts. Then, with a balanced budget amendment that includes debt reduction every year, let’s pass the American Dream on to future generations. These ideas work. Why not try them again?
Tymann is retired as Westinghouse’s President, International, where he led business development in 75 nations. He now is managing director of SEP World (Sustainable Energy Partners). He is a regular contributor to the NDN, a leader of the Naples Tea Party and a frequent lecturer in Southwest Florida. Email him at firstname.lastname@example.org.