Abolish corporate income tax
Sen. Carl Levin was aghast.
Before his committee sat, unapologetic and uncontrite, Apple CEO Tim Cook, whose company had paid no U.S. corporate income taxes on the $74 billion it had earned abroad in recent years.
“Apple has sought the Holy Grail of tax avoidance,” said Levin. “Apple has exploited an absurdity.”
Actually, Apple had done nothing wrong, except hire some crack accountants who chose Ireland's County Cork as the headquarters of the company's international division. Thus Apple paid on profits earned outside the U.S. nothing but a 2 percent tax imposed by the Irish government.
Far from being condemned, Apple's CPAs ought to be inducted into the Accountants Hall of Fame. It is no more immoral for Apple to move its headquarters for foreign sales to Ireland than for Big Apple residents to move to Florida to escape the 12 percent combined state and city income tax.
The problem here is not with Apple; it is with Sen. Levin & Co.
In a press release, “Avoiding Their Fair Share of Taxes,” the AFL-CIO hails Levin and bewails the fact that though the U.S. corporate tax rate is 35 percent, highest in the world, corporate income tax revenue has fallen to well below 10 percent of federal tax revenue.
Perhaps we should start thinking and acting as our forebears did. In the same Wall Street Journal that reported on Cook's defense of Apple, former Sen. Phil Gramm described that earlier America: “Over the late 19th century, real GDP and employment doubled, annual average real earnings rose by over 60 percent and wholesale prices fell by 75 percent, thanks to marked improvement in productivity.”
Astonishing. And what is the difference between that age and ours? A 35 percent income tax rate on individuals and corporations that did not exist then and would have been regarded by Americans of the Gilded Age as the satanic work of Karl Marx.
Since the U.S. corporate income tax now produces less than 10 percent of federal revenue and less than 2 percent of gross domestic product, abolish it. Get rid of it.
Assume this would cost the Treasury $250 billion in lost revenue. How to make it up? Put a 10 percent tariff on imports entering the United States, which last year added up to $2.7 trillion.
This tax reform would thus be revenue-neutral. And what would this accomplish?
Every U.S. corporation that had moved abroad in search of lower taxes in recent years would start thinking about coming home and bringing its production and its jobs back to America.
And that $2 trillion in income U.S. companies have stashed abroad would come roaring back into U.S. institutions.
“Since 1980, the U.S. has run trade deficits in every year totaling about $9 trillion,” writes columnist Robert Samuelson.
That has unmade America as a self-reliant republic and made China a manufacturing marvel. And those trade deficits are how America became a dependent nation in hock to the world.
From 1865 to 1914, America had 10 Republican presidents. All believed in financing government by taxing imports, not the incomes of U.S. citizens or the U.S. companies that employed them.
And this was how the miracle Sen. Gramm details came about.
Pat Buchanan is the author of “Suicide of a Superpower: Will America Survive to 2025?”