OCT. 27, 2014 -- We keep dancing around the fire on the economy. Economists blame the Great Recession; the failure to stimulate enough; and lack of consumer confidence in the economy. The Great Recession has been over five years, and the Federal Reserve has been stimulating for five years.
The trouble is that we've been offshoring or exporting our economy for fourteen years - offshoring our research, innovation, technology, production, and jobs. It's not lack of confidence by consumers; it's lack of money - offshoring payrolls.
Senators keep talking about jobs, closing loopholes, and tax reform, but we know tax reform doesn't work. Senators on the Finance Committee tell Chairman Wyden: "I'm all for tax reform, but I can't vote for it until this little thing is fixed." They say: "It's a local problem," when they know it's for some lobbyist. Every time we have tax reform, it costs revenues. Senators always sneak in another loophole. It took us six years to find the Ethanol loophole, which everybody voted to repeal.
Miller in The Washington Post (10/22/14) suggests that rather than
the Federal Reserve printing dollars and giving it to the banks, instead
give it to the people. We go to every extreme to avoid the obvious. When
President Clinton gave China "most favored nation" trade status
in 2000, Corporate America abandoned attempts for the President to protect
vital production. Offshoring started in earnest. Between 2001 and 2010,
the United States lost a third of its manufacture. Every Governor makes
every effort to attract industry and jobs to his or her state; but President
Obama fails to protect vital production in the U.S., and Congress does
little to make it profitable for Corporate America to produce in America.
don't find the VAT complicated or an addition to the states' sales tax.
"Value added" is the cost of doing business: staff salaries,
gasoline, light bill, etc. Corporate America includes in its sales price
the cost of doing business, or "value added." When business
replaces the Corporate Tax with a VAT, it includes the cost of doing business
in its sales price. When you replace the 35 percent Corporate Tax with
a 7 percent VAT, you cut taxes. The VAT is self-enforcing - you either
pass it on or pay it. The VAT cuts the size of government (IRS). The VAT
tax cut closes all loopholes, giving instant tax reform. We keep talking
about tax cuts, tax reform, and cutting the size of government, when all
you need to do is replace the 35 percent Corporate Tax with a 7 percent
Wall Street, the big banks, and Corporate America want to keep the offshore profits flowing; want to keep the market up. So they contribute to the President not to enforce trade laws; to Congress not to make it profitable to produce in America; to do nothing. The President and Congress do nothing.
the Corporate Tax replacement to every Democrat and Republican Senator,
but the President and Congress treat the VAT "Top Secret." They
won't even mention a VAT.
Senator Fritz 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 Making Government Work (University of South Carolina Press, 2008).
© 2014, Ernest F. Hollings. All rights reserved. Contact us for republication permission.
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