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Tax and cut


11/23/17



 The president and Congress are pushing for a tax overhaul that largely is aimed at lowering corporate tax rates. While tax cuts make for nice bumper stickers, what we need now is higher taxes on corporations and less spending. Even though the economy is on solid ground, we continue to deficit spend — spending $560 billion more in 2017 than the federal government took in. 

It doesn’t need to be super-complicated. When times are tough the federal government spends more and taxes less. This does two things. It creates a safety net for people and gives people more money to spend and in turn improves the economy. But now times are better. Unemployment is at its lowest level in 15 years and the economy is growing at a solid rate. If not now, when do we tackle our federal debt problems?
The proposed tax reforms are mostly aimed at lowering the corporate tax rate from 35 percent to 20 percent. Supporters argue that American companies aren’t competitive because of the 35-percent tax and reducing it will increase spending on higher wages. 
The real problem is that many large corporations make more and more of their money overseas, and bringing profits back home means they have to pay that 35 percent (minus whatever taxes they have paid to other countries). But there is a good reason we have this tax system. It prevents companies from shifting profits to lower-tax countries.
Apple and many other very profitable tech companies do this, shifting profits from intellectual property to small island nations where they pay less in taxes. Apple, Microsoft, Amazon, Google and Facebook have all benefited from government spending to create things such as GPS, the internet and our civil society to protect their intellectual property. These corporations are already sitting on $1.84 trillion, some of that here and some of that overseas. For whatever reason they aren’t using that money to pay higher wages or invest more in their businesses or to pay taxes. And now we want to give these companies more of a tax break? 
Will lowering their taxes suddenly incentivize them to start hiring more, investing more and paying more? It’s unlikely. If they were going to do that they’d spend some of the $1.84 trillion they have in the bank.
Taxes on these companies need to go up, not down, and at the same time we need to get serious about cutting spending. That means making tough decisions on reducing spending on the military, Social Security and other programs. If we did both those things we’d be able to keep the tax increases to a minimum and reduce spending only slightly. Now if only that would fit on a bumper sticker.





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