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Posts Tagged ‘Demagoguery’

Actually, the answer is all of the above.

He pontificates about debt, but he voted for the fake stimulus and budget-busting Obamacare legislation.

He’s a preening self-styled deficit hawk, but the nation’s four largest deficits have occurred since he became Chairman of the Senate Budget Committee.

As Chairman of the Budget Committee, with a bloated staff and a budget of millions of dollars, his only responsibility – under law – is to produce a budget resolution every year, yet it’s now been more than 800 days since he’s bothered to fulfill this obligation.

You may be asking why I’m going after Senator Conrad. Is it because I’m upset that he has played a key role in tricking some gullible Republicans into supporting tax increases, based on a laughably vague set of talking points?

Sure, that galls me, but I’m used to Republicans engaging in self-immolation. I can’t really get too upset with Conrad for taking advantage of GOP naiveté.

What irks me is that this buffoon went to the Senate floor last night to make an impassioned plea for higher taxes. But rather than honestly say that he wants to take more of our money, he demagogued about a building in the Cayman Islands.

According to our financial-wizard friend from North Dakota, there is something inherently criminal about this structure (offices of a top-flight international law firm) because it is the home of more than 18,000 companies.

Here’s an image I captured from one of Conrad’s earlier speeches, where he made the same accusation.

So why am I irritated about his speech? Is it because Senator Conrad lied about the number of companies at Ugland House? No, the Senator is correct (unlike Obama, who demagogued about the same building during the 2008 campaign, but said there were 12,000 companies).

What bothers me is that Conrad presumably is educated enough to understand that he is being disingenuous. While he’s been sucking on the public teat his entire life, surely he knows that a company’s home is merely the place where it is chartered for legal purposes. A firm’s legal domicile has nothing to do with where it does business or where it is headquartered.

But just to make things clear, here’s a picture of another building. This building is smaller than Ugland House, yet it is the home of more than 200,000 companies.

So why isn’t the empty suit from North Dakota attacking this building? Maybe we should ask the Vice President. After all, this building is in Wilmington, Delaware.

The moral of the story is that companies like to make their legal homes in jurisdictions that have honest courts, sensibly light levels or red tape, and business-friendly reputations. The Cayman Islands is such a place, as is Delaware.

To Kent Conrad, that’s de facto evidence of criminal activity. To normal and honest people, that’s evidence that good policy generates more economic activity.

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I’ve already commented on the Democrats deciding to wait until after the election before figuring out what to do about the 2001 and 2003 tax cuts. This was a remarkable development since failure to extend these pieces of legislation means a big tax increase next January. But this doesn’t mean the Democrats are sitting on their hands. The President has a proposal to significantly increase the tax burden on American companies that compete in world markets, and Democrats on Capitol Hill think this is a winning political issue. They think higher taxes will encourage companies to keep more jobs in America, and they hope voters agree. But as the Wall Street Journal opines, this is a recipe for undermining the competitiveness f American companies. This means fewer jobs, and probably less tax revenue.

…the President’s plan reveals how out of touch Democrats are with the real world of tax competition. The U.S. already has one of the most punitive corporate tax regimes in the world and this tax increase would make that competitive disadvantage much worse, accelerating the very outsourcing of jobs that Mr. Obama says he wants to reverse. At issue is how the government taxes American firms that make money overseas. Under current tax law, American companies pay the corporate tax rate in the host country where the subsidiary is located and then pay the difference between the U.S. rate (35%) and the foreign rate when they bring profits back to the U.S. This is called deferral—i.e., the U.S. tax is deferred until the money comes back to these shores. Most countries do not tax the overseas profits of their domestic companies. Mr. Obama’s plan would apply the U.S. corporate tax on overseas profits as soon as they are earned. This is intended to discourage firms from moving operations out of the U.S. …Mr. Obama believes that by increasing the U.S. tax on overseas profits, some companies may be less likely to invest abroad in the first place. In some cases that will be true. But the more frequent result will be that U.S. companies lose business to foreign rivals, U.S. firms are bought by tax-advantaged foreign companies, and some U.S. multinational firms move their headquarters overseas. They can move to Ireland (where the corporate tax rate is 12.5%) or Germany or Taiwan, or dozens of countries with less hostile tax climates. We know this will happen because we’ve seen it before. The 1986 tax reform abolished deferral of foreign shipping income earned by U.S. controlled firms. No other country taxed foreign shipping income. Did this lead to more business for U.S. shippers? Precisely the opposite. According to a 2007 study in Tax Notes by former Joint Committee on Taxation director Ken Kies, “Over the 1985-2004 period, the U.S.-flag fleet declined from 737 to 412 vessels, causing U.S.-flag shipping capacity, measured in deadweight tonnage, to drop by more than 50%.” …Now the White House wants to repeat this experience with all U.S. companies. Two industries that would be most harmed would be financial services and technology, and their emphasis on human capital makes them especially able to pack up and move their operations abroad. CEO Steve Ballmer has warned that if the President’s plan is enacted, Microsoft would move facilities and jobs out of the U.S.

I’ve commented on this issue before, but I think the best explanation is in this video, which makes the key observation that American tax law may be able to discourage U.S. firms from building factories in other nations, but that simply means that companies from other countries will be able to take advantage of those opportunities.

A lot of Democrats, at least in private, admit that going after “deferral” is bad policy. But this makes the current proposal especially disgusting. People in the White House and on Capitol Hill know it will hurt jobs and reduce competitiveness, but they don’t care. Or at least they put political ambition before doing what’s right for the American people.

If they really cared, the would fix what’s wrong with the current system. A very effective way to encourage more jobs and investment in America is to lower the corporate tax rate, which is the point I made in the Center for Freedom and Prosperity’s first video.

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