The recent political fight over the debt ceiling has taken focus off of the real problem facing American workers. The U.S. manufacturing base has steadily been eroded over the last 10 years because corporations looking to have every tax and profit advantage possible have manufactured and re-manufactured products overseas.
It’s getting harder and harder to find anything actually manufactured in the United States. As a matter of fact the U.S. is now a net importer of finished products, when just over a decade ago we were the largest worldwide manufacturer on this planet. The result is an economy left with currency pressures, trade imbalances, and a seriously diminished economic base.
All the more reason for Congress to approve the recent trade agreements with Columbia, Panama and South Korea submitted for approval by the Obama administration.
Not only has manufacturing moved overseas but trade embargoes have also hit us hard. The U.S. has maintained a trade embargo against Cuba for almost 50 years. Why? Originally it was because of their communist ideology but why then are we trading with China? Last time I checked China was still run by the Communist Party.
Just think of the export market potential of Cuba which is just 90 miles from Florida. The average Cuban that is lucky enough to have a car is driving a 1950’s era American vehicle.
We also to some extent have trade embargoes against any country that trades with Cuba. If this type of political policy isn’t a self-inflicted wound I don’t know what is. Recent developments in Cuba shows the government is now moving away from it’s rigid communist economic ideology, and experimenting with market reforms.
All I’m saying is that if we are going to compete we need all the export markets we can find, and we need to close all tax loopholes that send American jobs overseas. The shift of manufacturing jobs overseas is due also to globalization, improved skills of workers outside the U.S, and of course “free trade” policies.
The Department of Labor reports that well over 6 million manufacturing jobs that were once in the United States have moved to overseas countries since the early 1990’s. This is in part due to U.S. tax policy which allows corporations to defer or avoid taxes on their earnings outside of the United States.
How is this type of tax policy productive for the average American worker? The Obama administration has tried to eliminate this policy to no avail because businesses have said the elimination of this tax deferral would result in the loss of jobs here in America. Huh? Hasn’t that already happened with the tax policy in full effect?
U.S. companies complain about the statutory tax rate of 35% which other countries do not have. But in actuality no company pays that rate. The net tax rate paid by large American companies is more like 27% as of 2006. (Corporate Taxes: The Coming Struggle Over Who Pays What, Business Week, 2009).
Many other corporations are paying much lower rates in single digits and in the case of General Electric they paid almost no taxes at all due to tax loopholes and exemptions. G.E. is of course not alone but is typical of what is happening to American companies in general. It’s obvious the tax code needs to be revamped along with trade policy.
China makes it almost impossible to export to their markets unless first establishing a manufacturing plant in the country. But that creates jobs in China and not in the U.S., so why don’t we do what the Chinese are doing? How could they complain about a policy they have implemented in their own country?
The debate about reducing the deficit and national debt has to include tax reform as a way to raise revenues and spur business growth while at the same time reducing the debt and deficit. A lot of the current deficit is due to the government not collecting income taxes due to the lack of jobs after the global meltdown of 2008. I’m in favor of reducing overall rates if tax exemptions and loopholes are closed. The current tax policy status quo is counterproductive to the nations economic growth.
References
The CPA Journal
The United States Labor Department
Business Week
MSNBC