Will cutting Corporate Taxes solve unbalanced trade deficits?
King Solomon
Like a dog that returns to its vomit Is a fool who repeats his folly. (Proverb 26:11)
The fool never frees himself from the trammels of his foolishness; his deeds and words always bear the same character to the end. (Proverb 26:11)
Who are the Fools?
The GOP always returns like a dog to their same solution to fix everything….cut taxes.
While cutting taxes will certainly serve to put more money into the hands of consumers, the problem today is that because so many consumer products are made in other countries, the extra money will in turn most likely to be spent on imported products that will add to unbalance trade deficits even more.
We know from experience that the trickle down tax policy never balanced the budget. The best analogy I remember about the futility of cutting taxes to balance the budget was this.
“Cutting taxes to balance the budget and pay down the National Debt is like trying to pour water from a bucket on your head to trickle down over your body while at the same time you are standing in the bucket.”
So now the latest GOP political theory is that if we cut Corporate Taxes, it will make US products more competitive to sell in foreign countries and serve to increase exports to balance trade. In the opinion of Warren Buffet, this fix is more “wishful thinking and thumb sucking,” as he eloquently described in the previous post. In my opinion, this latest theory describes the GOP same O , same O wishful thinking solution in relation to the above proverb and will not work…..again.
Why?
Most savvy Corporations do not pay anywhere near the present amount of as what the politicians state. Corporations may pay perhaps ten percent, and many pay zero percent after a host of tax deductions, Even when they incur a loss any year, the loss amount can be deducted on future taxes on profits. (1)
The fact of any business tax is not paid at all by business. It is paid by their customers. All business does is pass on the tax in the form of higher prices. Also, the same bucket analogy of the GOP less taxes theory will only add to the National Debt bucket. Don’t forget it was the trickle down bucket theory that began the biggest accumulation to the National Debt in American history.
Why Won’t It Work Again?
Because no matter how low the price of American products that entail US labor as value added, the products will never be able to compete with the wages paid to foreign labor. If you remember what I stated in previous posts, US workers cannot compete with workers who are paid $200 a month when the average rent alone of a US worker is $800 a month. (2)
The basis that trade nation will only buy products based on competitive prices regardless of national interests, has proven to be another unrealistic dream theory. Currency manipulation by horse trader nations, bank interventions, etc. that have happened and are continuing are proof. (3)
Source Proofs
I have listed some Source articles below to explain my (1) (2) (3) above statements. Compare the wages of US workers to China or India workers. (Mexico shown separately), as to why I say US workers can never compete to make any product that is labor intensive. That is why Corporate Tax deductions will not work in my opinion.
So Why Does the GOP Want to Cut Taxes for Corporations?
Check out who profits the most when taxes are lowered for Corporations? It is the shareholder, not the customers as I explained above.
If you do not already know, approximately 80 percent of stock ownership is owned by only 10 percent of the US population. The same applies that 80 percent of the whole worlds assets are owned by 66 families in the world.
In My Next Post
I will explore the main argument of free trade supporters and the delta factor.
Regards and goodwill blogging.
Source Links and an Excerpt
(1)
More than 90% of US Businesses Don’ Pay The Corporate Income Tax HERE
(2)
Comparative Statistics of Wages Paid in Different Countries HERE
(3)
“Competitiveness: A Dangerous Obsession”, Foreign Affairs (March/April 1994)
Excerpt
- The idea that a country’s economic fortunes are largely determined by its success on world markets is a hypothesis, not a necessary truth; and as a practical, empirical matter, that hypothesis is flatly wrong. That is, it is simply not the case that the world’s leading nations are to any important degree in economic competition with each other, or that any of their major economic problems can be attributed to failures to compete on world markets.
- This article makes three points. First, it argues that concerns about competitiveness are, as an empirical matter, almost completely unfounded. Second, it tries to explain why defining the economic problem as one of international competition is nonetheless so attractive to so many people. Finally, it argues that the obsession with competitiveness is not only wrong but dangerous, skewing domestic policies and threatening the international economic system.
- To make a harsh but not entirely unjustified analogy, a government wedded to the ideology of competitiveness is as unlikely to make good economic policy as a government committed to creationism is to make good science policy, even in areas that have no direct relationship to the theory of.
- So let’s start telling the truth: competitiveness is a meaningless word when applied to national economies. And the obsession with competitiveness is both wrong and dangerous.
Paul Krugman HERE
Previous Posts
Post One HERE
Post Two HERE
Post Three HERE
Post Four HERE
Post Five HERE
Post Six HERE
Post Seven HERE
Post Eight HERE
Post Nine HERE
Post Ten HERE
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