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Wednesday, February 11, 2009
Ed Feulner :: Townhall.com Columnist
The Power of Zero
by Ed Feulner
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Will the Dems' health care Christmas Present to America be an improvement or detriment to our health care system?


Some will protest, of course.

Our nation’s convoluted tax code (so confusing that even a high percentage of President Barack Obama’s nominees apparently can’t understand it) keeps a small army of accountants and tax lawyers employed. A simplified code might put them out of work. But that would be a small price to pay for a fairer system, one that helps create many more jobs for ordinary Americans.

And creating jobs is what a federal stimulus is supposed to be all about.

A plan proposed by Sen. Jim DeMint, R-S.C, and The Heritage Foundation calls for slashing tax rates on individuals and corporations by 10 percent while repealing the alternative minimum tax and reducing the death tax. A Heritage study shows doing this would result in 493,000 more American jobs by the end of the year. By the end of 2010, employment would increase by 1.3 million jobs.

Imagine how many more jobs our economy could create if the government went further, completely repealing the corporate income tax. Multinational and international companies would be encouraged to operate in the United States. They would hire workers, bringing jobs and new technology to our shores.

Meanwhile, owners of corporations would have more money to reinvest in research and development and in buying new equipment. They would be more likely to hire and train Americans, since there’s less reason to even consider moving their business to another country. As these investments pay off, economic growth will occur.

Lawmakers should think carefully before they borrow hundreds of billions of dollars, digging a deeper debt hole and expanding the size and scope of government. Far better to eliminate corporate taxes -- and unleash the job-creation power of our nation’s entrepreneurs.

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About The Author
Dr. Edwin Feulner is president of The Heritage Foundation, a Townhall.com Gold Partner, and co-author of Getting America Right: The True Conservative Values Our Nation Needs Today .
 
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Tax rates do...
... have something to do with it. The cost includes the embedded tax. The price must fall between the cost and what somebody is willing to pay (assuming they aren't operating at an unsustainable loss). If the tax goes away, the cost will be less and there may be more buyers at the margin willing to buy at a lower price. Therefore, sales would be expected to be higher.

Furthermore, there is a compounding affect. The Cat customers would also be relieved of the tax. So they could lower the cost for their goods and services and see a subsequent increase in sales. This would lead to a higher demand for Cat products to support their increased business volume.

Nobody can tell you where it will end, but it isn't too hard to predict the direction.

Caterpillar
anticipates its sales for 2009 will be about $40 billion in 2009 down from $51.32 billion in 2008. If they're going to produce fewer machines, they're going to cut their labor force. Tax rates have nothing to do with it. On the other hand, increased spending on infrastructure will increase the demand for earth-moving equipment.

http://news.aol.com/article/caterpillar-posts-32-pct-drop-i n-4q/317643?icid=sphere_wsj_teaser
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