By ERNEST F. HOLLINGS, former U. S. senator
MARCH 28, 2011 -- The CBS program 60 Minutes last night related how business was avoiding "the highest business tax in the world" by moving to Zug, Switzerland.
Electric has just found another way to avoid paying the corporate tax
- hire a stable of Certified Public Accountants to prepare its Return.
GE just filed a 46,000 page Return, paying no taxes, and claiming a tax
benefit of $3.2 billion. This leaves the Main Street merchant paying the
corporate tax, and they need relief. Everyone agrees that the nation's
number one problem is jobs while Congress is in gridlock trying to lower
the deficit. Congress can solve all three problems by cancelling the corporate
income tax and replacing it with a 5% value added tax.
corporate tax is estimated to bring in $156.7 billion, whereas a 5% VAT
reaps $600 billion. The regressive nature of a VAT is eliminated by exempting
food, health and housing for the low income which would not exceed an
exemption of $100 billion. This leaves $350 billion to pay down the debt.
At present, the Republicans in the House of Representatives are aiming
for a $60 billion cut in the budget, and the Democrats are holding up
at $20 billion. So the $350 billion ought please everyone. But surprisingly,
Corporate America won't be pleased. It depends on the big banks and Wall
Street, and beginning in 1973, the big banks made a majority of their
profits off-shore. And Corporate America for the moment loves off-shore
production. It has no labor worries, health costs, safety or environmental
concerns. The profit is from year-to-year, and if it doesn't work out,
Corporate America walks away with no legacy cost. But this system will
soon run out. In four or five years China will need not just 51% of the
off-shored profit, but 100% to take care of the remaining millions brought
from poverty into the middle class. China has already brought 300 million
from poverty to the middle class. It is on-course to bring in another
400 to 500 million in about five years, and then it will need 100% for
the remaining 500 million. In the meantime, China slightly alters the
obtained technology, patents it, and it is becomes the article of trade.
When China kisses Corporate America "goodbye," it will return
home with nothing to produce.
the Advanced Technology Program in the State, Justice, Commerce, Appropriation
Bill to support innovation. The National Academy of Engineering had to
certify the technology as innovative and it had to be approved by a committee
in the Department of Commerce - no earmarks. The industry had to provide
50% of the funding. The Advanced Technology Program was highly successful,
but President George W. Bush defunded it as "corporate welfare."
Instead of crying for innovation, if President Obama would
Senator Hollings of South Carolina served 38 years in the United States Senate, and for many years was Chairman of the Commerce, Space, Science & Transportation Committee. He is the author of the recently published book, Making Government Work (University of South Carolina Press, 2008).
© 2011, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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