« FINAL PUSH: Stir Your Phone Into Triumphant Action. | WILLisms.com | Wednesday Caption Contest: Part 78. »

Trivia Tidbit Of The Day: Part 372 -- The Best Medicine For "Outsourcing" ("Offshoring") Of Jobs.

Not Surprisingly, Lowering Taxes Equals Greater Prosperity-

One month before election day in 2004, Republicans in Congress tossed those of us who love lower taxes a bone, if only a small one. On October 22, 2004, President Bush signed into law the "American Jobs Creation Act," which was immediately denounced by the left-wing establishment media as a meaningless and symbolic political ploy.

It was very much a Republican effort, as all the usual suspects (Pelosi, Rangel, etc.) of the Democratic Party voted against it. A look at the votes on this tax cut:

Just 36% of Democrats in the House of Representatives voted for it.
Meanwhile, 91% of House Republicans voted for it.

So, was it just a symbolic GOP trick to energize the base and boost turnout? Or did it actually accomplish something?

Well, obviously and not at all surprisingly to those of us who still believe in the free enterprise system, the lower taxes benefited the American people. Instead of gouging companies for making profits in other countries, the measure drastically cut the tax (to a flat 5.25%) on repatriated profits. This encouraged companies to reinvest those profits back home in the United States.

While this provision lasted only a single year (2005), the results were stunningly powerful.

The American Shareholders Association has the data on this little one-year-only tax experiment (.pdf):

* In response to lower tax rates, foreign subsidiaries increased their repatriations six fold from $36 billion in 2004 to $217 billion in 2005.

* As a percentage of Gross Domestic Product (GDP), repatriations increased from 0.31 percent in 2004 to 1.74 percent in 2005.

Stunning, yet not surprising. This is the kind of amazingly fruitful economic experiment that calls for more, more, MORE!

Another way to look at it (.pdf):

When the tax rate was low and simple, companies brought back their profits, creating jobs and boosting the economy (and filling the coffers of the Treasury) here in the USA.

Even if their profits could generate a better return in the U.S. than overseas, America’s current tax system encourages American companies to invest in foreign countries and not invest in America. We need to replicate 2005's low, flat repatriation tax policy and make it permanent. Immediately. We need to end the current travesty of double taxation that is putting American companies at a competitive disadvantage.

Want to stave off outsourcing of jobs to other countries? Economic isolationism in the vein of what our new Democratic overlords from the Ohio River Valley and elsewhere want is not the answer. Tariffs and protectionism and nativism are not the answer.

Lower taxes, predictably, are.

Previous Trivia Tidbit: Time To Lower Our Corporate Tax Rate.

Posted by Will Franklin · 7 November 2006 10:23 PM

Comments