On Sunday, America became the proud holder of a new world record: the highest corporate tax rate on Earth. Japan used to be a wee bit worse, but on April 1 they lowered their 39.5 percent rate to 36.8 percent, leaving our 39.2 percent good enough to claim the gold medal for hostility to business.
Last week, speaking at a manufacturing plant in Iowa, Vice President Joe Biden explained how the Administration plans to address the crippling effect of high American tax rates upon international competition:
For years, American manufacturers have faced one of the highest tax rates in the world. We want to reduce that by over 20 percent. We want to drop the rate, particularly, for high-tech manufacturers like you, Mr. President, even further than the 20 percent… We want to create (what’s called) a global minimum tax, because American taxpayers shouldn’t be providing a larger subsidy for investing abroad than investing at home.
(Emphasis mine.) There was much consternation over this “global tax” idea. Who would collect it? Who would decide how the money was spent? What influence would American voters have, with some sort of trans-national United Nations-administered taxing authority?
In reality, the Global Minimum Tax is not a new idea, and it doesn’t involve a global Internal Revenue Service imposing its mandates upon every nation. (At least, it wouldn’t start that way.) The idea is to impose heavy U.S. taxes upon overseas profits, destroying the competitive advantage of nations with more advantageous corporate tax rates. Uncle Sam would snatch away whatever benefits an American company would enjoy from overseas investment in less heavily taxed business environments.
This is one more example of clumsy statists attempting to sell us on anti-competition as the “cure” to the very problems it causes.
It is commonly said that the government produces nothing – it has only such funds as it is able to seize from the private sector through taxation. That includes deficit spending, which is the modern version of an idea our Founding Fathers opposed very strongly: taxation without representation. Trillion-dollar deficits are massive taxes levied upon our children, and generations yet unborn.
But the government actually does have a product to sell. It sells anti-competition, which is the use of regulatory power to reshape previously “free” markets. A wide range of specific products are available under the anti-competition brand name, including bailouts, mandates, tax breaks, subsidies, and tariffs. Payment is made with ideological support and campaign contributions.
Some industries depend entirely upon the purchase of anti-competition from the government. “Green energy” is the paramount example. It has absorbed countless billions of dollars in direct subsidies, along with government manipulations designed to reduce the supply of competing energy resources, and drive up supply. Private investors aren’t interested in throwing their money down solar-panel rat holes, or building ugly wind farms that provide negligible amounts of energy. That’s why massive government subsidies and taxpayer “loans” are required, along with oppressive regulation of the energy sources consumers and investors actually do want.
Very few people are interested in buying electric cars, but absolutely no one would be willing to pay what they really cost, after all of those gigantic government subsidies are subtracted. As much of a failure as the Chevy Volt turned out to be, it would have been far worse if customers were asked to pay the full price of the vehicle, which is north of $200,000 per car. Furthermore, the company that produces the Volt only exists because a gigantic taxpayer bailout – never repaid, despite constant Administration lies to the contrary – rescued it from competitive failure. And that failure occurred, in large measure, because labor unions achieved a monopoly over the supply of labor to General Motors, imposing costs that could not be sustained by its business model. The Volt is powered by anti-competition as much as by electricity.
ObamaCare is another large-scale deployment of anti-competition. The government dropped crushing mandates upon insurance companies, including requirements for the coverage of pre-existing conditions, which is not “insurance” under any sane definition of the term. The flexibility of companies to offer a variety of products, at different coverage levels and price points, was destroyed. In order to avoid instantly bankrupting these companies, the “individual mandate” was introduced, shredding our Constitutional liberties to force Americans to purchase an undesirable product from companies no longer free to attract their business through competition.
Competition will be further degraded as insurance companies find themselves unable to compete in the post-ObamaCare environment. The Congressional Budget Office is constantly revising its very conservative estimates of Americans who will lose their health care coverage due to terrified employers dropping their policies and paying the not-a-tax, not-a-penalty fee to escape from ObamaCare.
ObamaCare was, in turn, an anti-competitive policy designed to “fix” problems caused by the way government regulations distorted the insurance market… which itself became an anti-competitive barrier, separating patients from their doctors.
Now we’ve got Vice President Biden cheerfully suggesting that the “cure” for America’s absurd corporate tax rates is to impose more regulatory power upon businesses that try to escape from them, coupled with carefully targeted tax breaks for politically favored industries. The most easily anticipated “unanticipated consequence” of this dopey idea would be foreign companies buying up American firms left and right, to pull their international operations away from Barack Obama’s grasping fingers.
The simple solution of lowering American tax rates, to make us more competitive with the rest of the world, would never occur to anyone on the statist Left. They won’t even permit themselves to think about the higher revenues to be gained from lower tax rates, which would spur increased economic activity and less tax-avoidance behavior: a smaller but more valuable slice, cut from a larger pie. No, the answer must surely involve bigger government, more laws, more bureaucrats… and more taxes, coupled with more special exemptions, to be given away as the ruling class sees fit.
Healthy competition requires choice. When the consumer is not free to make choices, or businesses are not free to offer alternatives, competition does not exist. Competition also melts away when consumers don’t have the information necessary for making rational decisions. We instinctively understand that fraud is anti-competitive, because a false choice isn’t a real choice. Separating people from the marketplace with layers of third-party payment also destroys competition, for the same reason. How can people make informed decisions when they don’t understand what they’re buying?
All of these principles work in reverse. The death of competition inevitably brings the loss of choice. The largest infusions of anti-competition, such as ObamaCare, are inherently fraudulent – virtually everything the President and his Party told us about this bill, prior to passage, was a lie. The government never comes clean with voters about the way its exercises of regulatory power and subsidies distort markets, raise prices, or exacerbate the effects of inflation. Instead, fingers are always pointed at what remains of the private sector… and the people on the wrong end of those quivering fingers usually become the next targets for anti-competition.
It’s a damning indictment of Big Government that it so eagerly pushes the cause of our problems as the “cure,” and it’s no coincidence that the resulting death spiral resembles the final stages of a fatal drug addiction.