Wednesday, February 22, 2012

Obama Proposes to Lower Corporate Tax Rate to 28%, Forgets His China Policy

Obama has proposed lowering the corporate tax rate from 35% to 28%.  I admire the notion that lowering the tax rate will draw more businesses to conduct their operations in the United States, but again I have to point to the "China price" trumping his proposal.  The major corporations prefer low-tax, low-regulation, low-wage countries, such as China, for conducting their operations.  These types of countries offer the easiest, and most ethically questionable, way to generate higher profits.  Leave the pollution there, don't care for the community's health and wellness, and outsource responsibility.  This is the typical business model of major corporations.

How is this relevant to Obama's proposal?  The real problem lies in the institutionalization of poor ethics, which has driven investment into the countries where the rules can be broken for a relatively cheap price or where there are few rules at all.  It's simple - the major corporations based in the United States and Europe have chosen to operate in and exploit other countries because everything is cheaper.  Therefore, Obama wants to kick down the high corporate tax a few notches, but all the policies that drive corporations to other countries in the first place remain.  Forget the loopholes that allow the major corporations to skirt that 35% tax rate in the first place.

China joined the World Trade Organization in 2001.  Just look at the trade statistics since the accession:


The numbers are pretty clear.  Exponential growth.  China's production has literally exploded since the WTO accession in 2001.  I should probably find the direct policies affecting the trade, with quotas and eliminations of foreign investment laws, but anyway we look at it, the United States is the big player in the Chinese trade relationship.  The U.S. is also the home of the major proponents of getting China into the WTO.  The saying goes, a tiger can't change it's stripes.  If Obama really wants businesses to return production and manufacturing to the U.S., he's going to have to address his China policy, which doesn't stray in the least from his predecessors.  Also, the tax rate for American imports in China is 25%, and the tax rate for Chinese imports in the U.S. is 2.5%.  Explain that little fact away with the coming tax debate, Obama.

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