Saturday, August 13, 2011

Romney is right (things I never thought I'd say, chapter 1)

Corporations are people, or at least owned by them, ultimately.  And many are union workers, public employees, and nearly everyone else who has a pension or 401(k). Liberals should stop seeing publicly-owned companies as the enemy and embrace them for their potential to cheaply achieve policy objectives.

Radical idea for liberals to consider: rather than harping on corporations to "pay their fair share", maybe the best jobs program would be to cut corporate taxes, increasing the incentive for them to invest here rather than abroad. Make it palatable to deficit-obsessed legislators by offsetting the tax loss with a hike in personal taxes on rich people, or possibly even in dividends and capital gains tax rates. Let's consider the effects (beyond the aforementioned U.S. job creation):

1. Nominally revenue neutral, likely revenue positive in the long run as more jobs (and income taxes) would get created in the U.S. than you would otherwise expect.

2. Progressive tax solution.  Taxing dividends and capital gains is highly progressive, for two reasons.  First, the dividends and capital gains most middle class people see are in tax-favored accounts, like pensions, 401ks, and IRAs.  Second, rich people receive a much higher proportion of their income from investment earnings than their day jobs.

3. Calls GOP's bluff about being the party of "job creators", not just the party of rich people.  Conservatives say that raising taxes on the wealthy hurts job creation because many of the wealthy are small business owners. A tax policy that favors corporations over sole proprietorships, partnerships, and other forms of businesses will push business owners to incorporate, allowing policymakers to distinguish between "job creators" and merely rich people.

4. Reduces risk of future recessions by reducing financial risk of corporations.  Interest on debt is a tax-deductible business expense, so reducing the tax rate also reduces the incentive for corporations to borrow money. The less beholden companies are to creditors, the easier it will be for them to weather adverse business conditions.

Liberals hating on corporations is like Pogo's famous "I have seen the enemy, and it's us" - people own these corporations.  Let's do what we can to encourage corporations to invest in the U.S. by shifting their tax burden to the people who own them.

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