AUG. 1, 2014 -- We all know that the Republicans and Democrats in Congress disagree and nothing gets done. But what the Republicans and Democrats agree upon is what's frustrating us. If a Governor fifty years ago, you would know that your first duty was to balance the budget and attract industry from the North.
Now, the first duty of the President and Congress is to balance the budget and attract industry. Since 2001, Presidents Bush, Obama, and Congresses have agreed to not balance the budget, increasing the debt $12 trillion in fourteen years; have agreed not to protect the economy in globalization and make it profitable for Corporate America to produce in America.
Globalization is nothing more than a trade war with production looking for a country cheaper to produce (mainly China). China sets the competition in globalization with its closed, controlled market and predatory practices. Our greatest frustration is: while Corporate America continues to build China's economy, it continues to offshore its innovation, research, technology, production, jobs, payrolls - our economy to China. Wall Street, the Big Banks and Corporate America want to keep the offshore (China) profits flowing so they contribute to the President and Congress not to balance the budget; not to protect the economy; not to attract industry; to not make it profitable for corporate America to produce in America and create jobs; to do nothing. The President and Congress have a duty to balance the budget and attract industry but agree to do nothing.
While calling for jobs, the President and Congress continue the highest Corporate Tax on business and President Obama fails to give Corporate America certainty that its investment will be protected against closed markets and predatory practices by enforcing our trade laws. The President and Congress agree to call for free trade and not to compete in globalization. Voters going to the polls in November, and again in 2016, don't' have a clear choice on the economy and jobs.
Republicans or Democrats could easily give the voters a clear choice by replacing the 35 percent Corporate Tax with a 7 percent Value Added Tax used by 160 countries. The VAT is rebated on exports. The Corporate Tax is not rebated. Not having a VAT stultifies manufacture in the U.S. and allows competing countries with a VAT to locate production in the U.S., taking away production from Corporate America. A U.S. entrepreneur has to pay a 35 percent Corporate Tax and when his exports reach China, a 17 percent VAT. A competitor in the U.S. can produce the same product in China, import it tax free and the 52 percent tax difference will put the entrepreneur out of business.
Last year's Corporate Tax produced revenues of $288 billion. A 2013 a 7 percent VAT would have produced $945 billion. Now, we have billions more for Congress to balance the budget in two years rather than ten. Abolishing the Corporate Tax permits Corporate America to repatriate $2 trillion in offshore profits and create millions of jobs. Since the VAT has no loopholes we have instant tax reform. The VAT is self-enforcing - you either pass it on or pay it permitting the government to be downsized (IRS). The Corporate Tax is full of loopholes for the multinationals but the Main Street merchant or small business pays the full 35 percent. This tax cut helps small business.
If a Republican
or Democratic Senator introduces this tax VAT cut the first day that Congress
returns, it can be debated for two months and when the voters go to the
polls in November, they will have a clear choice. But barring this tax
cut, the President and Congress continue to get the contributions, do
nothing, while the country goes broke.
Senator Hollings of South Carolina served 38 years in the United States Senate, and for many years was Chairman of the Commerce, Space, Science & Transportation Committee. He is the author of Making Government Work (University of South Carolina Press, 2008).
© 2014, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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