The national debt of the United States now exceeds $16 trillion. Current estimates suggest that the present year’s deficit will amount to approximately $1.1 trillion, a negligible improvement upon 2011’s $1.3 trillion deficit. The present unemployment rate is one of the highest of the past sixty years, with approximately eight percent of Americans unable to find work. Unless significant changes are made in both federal income and expenditure, the economic livelihood of future generations is bleak.
Many individuals mistakenly turn to the federal government in search of a solution to our nation’s high unemployment rate. Yet, it is not the federal government that creates jobs, per se. Businesses, small and large, are responsible for creating and providing jobs. Due to the federal corporate income tax, though, businesses are currently forced to part ways with a significant portion of their resources. These same resources, were corporations allowed to use them, could be used to expand, hire additional employees, pay existing employees higher wages, provide increased returns to shareholders, and lower the prices that consumers pay for goods and services.
One of the most fervently expressed gripes about our current political environment is that our government no longer serves its purpose of representing the interests of the American people. Aside from serving as an impediment to job creation and economic stimulation, the federal corporate income tax is largely responsible for inviting corporations into the political spectrum. Corporations sink vast sums of money into efforts aimed at leveraging legislation favorable to their interests. In 2003, after reincorporating in Bermuda, Tyco paid Jack Abramoff’s lobbying firm $150,000 per month for its successful assistance in preventing the passage of legislation which would subject the company to U.S. taxation which would have amounted to nearly $4 billion.
Despite the significant control corporations wield over our government’s policy-making, businesses have taken further, and more drastic, measures in order to avoid tax liability. With the world’s highest federal corporate income tax rate, it should come as no surprise that the United States is perceived as exceedingly unwelcome to big business. Not only are we failing to invite foreign businesses to American soil, but many of our own businesses have moved their operations out of the United States and into countries with more favorable tax rates.
For example, technology giant Google has begun shifting portions of its business to Ireland, to a subsidiary entitled Google Ireland Limited, where they are greeted by the comparably minuscule corporate tax rate of 12.5%. Google Ireland Limited employs approximately 2,000 Irish citizens, jobs that would have been provided to American citizens were it not for our federal corporate income tax rate being twice that of Ireland.
Though 2,000 jobs may appear negligible in light of the millions of unemployed Americans, Google is far from the only corporation to look elsewhere when attempting to expand. In fact, Facebook, Amazon, Intel, Microsoft, Hewlett Packard, and others have all begun following similar tactics to those of Google as a means of lessening tax liability. According to the Wall Street Journal, over two million jobs have been moved overseas. Moreover, in May of 2011, JPMorgan Chase and Co. reported that United States companies were holding approximately $1.4 trillion in undistributed foreign earnings.
Policies that serve to outsource American jobs are contradictory to our nation’s economic needs. Reducing or eliminating the federal corporate income tax would allow the United States to be competitive in the global market, bringing our own businesses back home and drawing foreign corporations to our soil. The increased payroll, personal income, dividend, and capital gains taxes drawn from the creation of new jobs would serve to replace the revenue previously created by the federal income tax. The federal government may not create jobs, but they do have the power to pass legislation that will foster an environment in which millions of jobs could be created in the immediate future.