Want To Bring Money And Jobs Back To The US? Change The Tax Policy!
Whether you are talking to democrats or republicans, conservatives or liberals, nearly every American seems to agree that our economic situation needs improvement. With the real estate market still floundering to recover from massive foreclosures in many cities and unemployment rates that just don’t seem to change, political giants from all backgrounds say that something has got to give. But can it be done and with what method? One solution that has been proposed is changing the corporate tax law and rate.
Over the last 10 years, the United States has experienced domestic job loss like never before. While this can be attributed to a number of factors, the most prominent reason is outsourcing and the movement of work overseas. From manufacturing facilities and customer service call centers to computer engineers, health care services, and other professional trades, the loss of domestic work is a huge problem for the United States and its people.
But it isn’t just the jobs that are relocating to more tax friendly countries. Many US corporations are also refusing to keep and spend their money at home as well. According to a CNBC publication, about $1.7 trillion, owned by US companies, remains offshore. Financial giants like Microsoft, Oracle, and Cisco are rumored to keep between 80% and 90% of their monies in countries outside the United States. Why? With current corporate tax rates set at 35%, even strong US companies are choosing to take their growth, their jobs, and their cash to countries who offer tax incentives and lower rates.
One question that seems to arise quite regularly…when conversations and political debates turn to corporate outsourcing and off-shoring of jobs and money…is “Can it be fixed?” While some believe that bringing assets and employment back to the US is a lost cause, others adamantly affirm that it can be done. Even CEO’s and spokespersons for companies currently engaged in large amounts of overseas ventures seem hopeful. But it will require a change in the tax policy.
Step 1: Stop the Bleeding
As any good paramedic will tell you, the first step in saving a patient with massive blood loss is to stop the bleeding. Before we, as a country, can begin bringing our jobs home, we have to first make changes to secure the jobs that are still left. One way to do this is by giving tax incentives to companies who keep their jobs and their money in the US and doing away with tax incentives for off shoring and overseas spending. Legislation that gives corporations who move their production overseas tax deferment, for example, has to go. While it may not “create” or “bring home” a myriad of assets quickly, closing current tax loopholes supporting outsourcing of jobs and taking steps to build relationships with companies that still employ in the US is a first step to changing the course of our job market and our economy for the better.
Step 2: Become Competitive
While many people argue that the choice to move factories, jobs, and assets oversees is purely political, in most cases it really is more about companies trying to maintain their profits and keep their doors open. It also seems to be just good business. When those responsible for financials shop around, it doesn’t take a mathematician…or political activist…to realize that paying an effective tax rate of around 27% of profits (average in the US) compared to about 20% (in most other countries) can make a huge difference in a companies bottom line. And while Congress wishes to hold tight to their current tax policies, this wide tax rate gap has…and will continue to…drive companies away.
The answer, then, lies in becoming more competitive with our tax policy as a nation. Despite what has worked…or hasn’t worked…in the past, the United States has to realize that without a competitive advantage, our economy will continue to suffer. We have to make it financially feasible for a company to choose to expand, spend, and hire within our borders…something that the current corporate tax rate and tax policy is failing miserably at doing.
Step 3: Reward Returns
During the Presidential debate in October 2012, CNN’s Candy Crowley asked both President Obama and candidate Mitt Romney the question, “IPad, the Macs, the iPhones, they are all manufactured in China…How do you convince a great American company to bring that manufacturing back here?” While the answers from the two men in question varied greatly, Apple CEO Tim Cook hit the nail on the head with his response later on. When asked if he thought that an Apple product would ever be made in the US again, he said, “I want there to be … and you can bet that we’ll use the whole of our influence on this.” Just a few short months later, in December, Cook announced that Apple would be moving the production of at least one Mac computer back to the US. “I don’t think we have a responsibility to create a certain kind of job,” Cook said. “But I think we do have a responsibility to create jobs.”
Even now, many companies are doing their very best to bring home jobs and money that have been sent elsewhere. Whether it is because of responsibility, patriotism, economics, or some other underlying reason, it is up to our country to reward and applaud these returns. If other companies began to see their competitors and associates successfully return work and resources to US soil, then it won’t be long until they follow suit as well.
I want more stuff like this!