President Obama is an attorney by trade so I suppose he can be forgiven for failing to understand how his tax policies make it difficult for American businesses to compete on the global stage. On the other hand, he can’t be forgiven for not caring. To begin with, like most liberals the president views corporations solely as revenue sources to be tapped to support his tax-and-spend approach to governing. President Obama and his liberal counterparts in Congress do not view corporations from the perspective of job-creation or wealth generation. Nor do they view corporations collectively as the economic engine of our nation, an engine that is being clogged up, bogged down, and overloaded by corporate taxes. Rather, they view businesses as bottomless wells of revenue for an increasingly engorged federal government.
What President Obama and his fellow liberals cannot seem to understand—or understand but don’t care about—is that when American corporations are unable to compete in the global marketplace they will no longer be able to pay the taxes he bleeds out of them to finance his big-government programs. There is a bottom to the well, and the less competitive American businesses become on the global stage the sooner the IRS will reach that bottom. The sad truth is that Barack Obama and his fellow tax-and-spend liberals should have paid more attention to the nursery rhymes of their childhoods, particularly the one about killing the goose that laid the golden egg.
Even taxes that are necessary and justifiable are counterproductive in that they tend to rob individuals and organizations of productivity and incentive. This is why government officials should always take a minimalist approach to taxation. However, corporate taxes as structured in America may be the most counterproductive of all taxes because of the deleterious effect they have on the economy. Corporate taxes tend to diminish investment, reduce wages, transform full-time jobs into part-time jobs, discourage hiring, reduce research and development, dampen innovation, and create a bunker mentality among corporate leaders. These effects, in turn, rob businesses of their productivity, quality, innovation, competitiveness, and ultimately profits. The equation is simple: No profits = No business and No business = No taxes for the government. Apparently this simple equation is not taught at Harvard Law School.
An editorial in The Washington Times of June 10, 2013 revealed that “The overall U.S. statutory tax rate is 39.1 percent, more than 2 percentage points higher than Japan’s and 14 points higher than the Organization for Economic Development and Cooperation (OECD) average. Our effective rate, at 27.6 percent, is 12 points higher than the OECD average. According to a World Bank study of 185 countries, companies operating in the United States have the highest cash tax payments.” The article went on to explain that higher tax rates have not produced additional revenue for the government because they have had the predictable effect of reducing profits. The economic concept at work here is simple enough that even liberals should be able to understand it. That is, if they cared to. Higher tax rates drive down business investment, innovation, and productivity and when this happens, profits decline. When profits decline, so do tax revenues. A higher tax rate applied to lower profits will yield lower tax revenues, while a lower tax rate applied to higher profits will yield increased revenue. Said another way, would you rather have 10 percent of $100 or 39.1 percent of $10. The math is elementary, but Barack Obama—even with his Harvard Law School Degree—cannot seem to grasp it. Barack Obama’s need for a course in remedial math wouldn’t be such a bad thing if not for one little inconvenient fact: he is President of the United States with a majority in the Senate.