Imagine the outsourcing debate in Japan's Diet, where representatives lament the hollowing out of Japan's manufacturing base as companies like Toyota, Honda and Nissan shift operations to North America and elsewhere. The bottom line in trade is that "more is better" for everyone, whether you live in Toledo, Tokyo or Taipei.
To his credit, Kerry recognizes that foreign taxes are in many cases as much as one-third lower than U.S. taxes on corporations. He also is to be commended for suggesting that we cut the corporate tax rate, but it doesn't make sense to turn around and raise corporate taxes in other ways as he proposes. The 5 percent rate cut he proposes (from 35 percent to 33.25 percent) is too way too small. Why not cut the rate by one-third to 23 percent to bring the U.S. corporate tax rate more into line with our trading partners and competitors for capital and firms. Now that's a real solution to keep refugee CEOs from fleeing the greedy hand of the tax collector.
Of course, the ultimate solution is to overhaul the tax code and cease the onerous practice of worldwide taxation altogether, moving instead to a system of territorial taxation where firms are taxed only on the activity conducted inside the United States. Unfortunately, Kerry would move the tax code in exactly the opposite direction by ending tax deferral on income earned by foreign subsidiaries of U.S. companies and adding a complex new jobs tax credit.
It is difficult to stand up for free trade if you represent a district in North Carolina that is losing jobs in furniture manufacturing or in the textile industry. It's hard to look a constituent in the eye who has lost a job because the firm is going overseas. I know because I was a free-market congressman representing Buffalo, N.Y., for 18 years. The solution is not, however, to punish firms for wanting to leave but to empower them to want to stay in the United States.
We at Empower America have proposed Enterprise Zones of Choice (EZTaxReform) for areas adversely affected by trade. The zones would be able to opt out of the current tax code and into a fully reformed tax code. The incentive effects of this proposal, coupled with existing job retraining programs, should help to turn problems associated with free trade into solutions for America's displaced workers.
The benefits from trade are everywhere to be seen. This year the United States and the rest of the world set new records for GDP, at $11 trillion and $33 trillion respectively. This could not have been achieved in the absence of free trade. Going forward, if we are equipped with facts gained from an understanding economic fundamentals, if we are armed with creative solutions to problems that arise from free trade and if we have the courage of our convictions, we can maximize both freedom and prosperity, not only here in the United States but also around the world.