Demonizing Big Business is Not Going to Bring Back Jobs

Donald Lambro

8/26/2011 10:47:00 AM - Donald Lambro

WASHINGTON -- When a heckler at the Iowa State Fair told Mitt Romney that raising taxes on corporations was one way to solve America's fiscal and economic problems, the former governor shot back that "Corporations are people, my friend."

The heckler and his friends groaned in disbelief. They believed, as they had no doubt been taught in school, that corporations were part of the nation's evil power structure, beholden to no one, made up of faceless, amorphous rich executives who made big money at the expense of ordinary people.

Romney, whose career as a venture capital investor has helped build up companies such as Staples, with 80,000 employees now on its payroll, knows that the people who make corporations succeed are the millions of Americans up and down the chain of production and management. Big corporations are successful because of productive and innovative employees.

Romney returned to this heckler's question at a town hall meeting in Claremont, N.H., Wednesday, to further elaborate on his answer, which had been boiled down to a sound bite on the TV nightly news shows.

"Corporations -- they're made up of people. They're just groups of people that come together for work. When you say 'tax corporations' -- the steel and the vinyl and the concrete, these things don't pay taxes. Only people do ...

"I know there are people that don't like business. I like business."

So do the tens of millions of Americans who work for businesses large and small to pay the mortgage, put food on the table, give to charities and churches, educate their kids, and of course pay their taxes.

Romney is correct when he says corporations do not pay federal income taxes because they add their taxes to the prices of their products or services. Customers pay that tax.

President Reagan was so fond of reminding Americans of this economic fact of life that he suggested we should end the corporate tax -- taxing only individual incomes and thus make U.S. businesses more competitive at home and abroad.

But what really rankled Romney was the implicit suggestion by his questioner at the Iowa fair that somehow corporations were no longer contributing their fair share to the country's economic and fiscal well-being.

Consider a few fundamental statistics on businesses large and small:

-- U.S. multinational corporations employed more than 21 million Americans here at home in 2009.

-- Nearly 48 million Americans work for businesses with 500 or more employees.

-- Fifty-two percent of all American workers are employed in businesses with fewer than 500 people, according to the U.S. Small Business Administration.

Big corporations employ millions of Americans, but the majority of Americans work for small businesses. The goal of a prosperous and thriving economy is to build an economic climate, and tax policy, that encourages growth, business expansion and more jobs.

With a national unemployment rate that is stuck at more than 9 percent and into double-digits in a number of states, and a weak growth rate hovering around 1 percent, it's clear that President Obama's policies of the past three years have been an utter failure. Only 58.1 percent of our population is working. That's the lowest percentage since the early 1980s.

The way out of this recession is not to raise taxes on corporations and other businesses, but to reform our tax code to stimulate growth.

We have a corporate tax structure today that sets the top rate at 35 percent -- the second-highest corporate tax rate in the industrial world. It's triple Ireland's tax rate, and 10 points higher than in Austria, China or Denmark. Only Japan's is higher at 39.5 percent, though it plans to lower its rate this year.

It is no secret that few corporations pay the top rate because of a maze of tax breaks, loopholes and other ways to write off various expenses, losses and even offset foreign tax bills. They have been written into the tax code by Congress over many decades. But now the tax system is in need of a thorough cleansing to eliminate many of these tax breaks and significantly broaden the tax revenue base, while at the same time lowering the overall tax rates.

President Obama's bipartisan deficit commission proposed doing just this in a plan last December that would effectively bring in more revenue by plugging or shrinking tax loopholes, while lowering the top tax rates to 28 percent or less.

Unfortunately, Obama did not embrace his own commission's recommendations, preferring to demagogue against "millionaires and billionaires" and big corporations whom he claims are not paying their "fair share."

That may appeal to Obama's narrowing base of anti-business supporters and lead to heckling Republican presidential candidates, but it doesn't offer any pro-growth, pro-employment solutions to get the battered U.S. economy back on track.