Monday, July 1, 2013

Bring Back Jobs From Asia By Helping Small Business

Small businesses create some 70% of the jobs in this country, so small business creations are the lifeblood of the economy.  Small business creation is dropping like a rock in recent years and that's not a good thing for employment.

Number of Establishments Less Than 1 Year Old 1994 to 2010

Small Firm "Start-Up" Rate

 

Over-Regulation, In Part, Is Killing Jobs


ObamaCare is killing small business and jobs. It's not the only thing hurting jobs. Other types of over-regulation at all levels of government, taxes and of course the lousy business environment are also killing small businesses.  How likely is that Obama will have an epiphany about ObamaCare?  Never!  He's too busy dreaming up even worse job killing initiatives like carbon emission regulation sure to limit our available electrical power, kill our coal industry, raise prices to consumers just like a tax and kill jobs!!  Expect brown-outs in the future due to power shortages but after Obama is gone (so people won't get the connection).  We will never have a vibrant economy as long as Obama is President!!  If Obama really cared (which he doesn't) or were smart (which he isn't) he would make small businesses exempt from the requirements of ObamaCare.  This would be the first thing to do.

Bring Back Manufacturing Jobs From Asia


I say to bring back jobs from Asia!

First , China and Asian cost advantages have largely dissipated in recent years due to their own wage and cost inflation.  It's highly likely that a reduced top US corporate tax rate of 25% (from 35%) will bring back jobs to the US from China and Asia. This is a nascent trend already. But the US has the highest corporate tax rate in the world and the only country to tax world-wide income. From Veronique de Rugy at Mercatus.org

US Corporate Tax Rates Are the Highest In The World

The US has the highest marginal tax rate in the world. Interestingly, it has one of the lowest corporate tax revenues in the OECD as well!  It's because there are so many tax loopholes including the dollar-for-dollar tax credit for foreign tax paid.  More importantly, the IRS allows US corporations to defer taxes on earnings until those earnings are repatriated to the US. These tax treatments are incentives to relocate and retain earnings overseas since it reduces their US tax burden.  If tax rates worldwide were the same, this issue would go away.  One way to solve the problem is to reduce top corporate tax rates to match overseas rates and also reform tax loopholes.

Obama can only demagogue such issues--never fix them. 

US corporate tax policy has been an incentive for big businesses to shift operations overseas.  This affects large companies and manufacturers the most, but they are the ones who have created millions of jobs overseas in response to our own disincentives.  Herein lies an opportunity to bring back large numbers of these jobs back to America!  If you really want to help minority unemployment, which no one ever mentions, then lower tax rates on the multi-national corporations. 

I suggest that Congress lower the top corporate tax rate (and reduce the number of loopholes)  to make the US top rate more competitive with international tax rates and reduce the incentive for big business to shift operations overseas.  Incentives work! 

The repeal of ObamaCare would be very important to "normalize" the now disrupted business environment.

Also, since taxes are an expense to business, so it's important to lower the  top personal income tax rate to 25% for the small business creators who file as LLC and Subchapter S.  This would help small businesses.  John Boehner made this argument when Obama pressed for higher top individual tax rates. Obama doesn't see it or he's just doesn't care.  There are none so blind as those that cannot see.

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