- The Washington Times - Sunday, August 3, 2008

ANALYSIS/OPINION:

Grover G. Norquist

America has less than 5 percent of the world’s population and creates 26 percent of worldwide income. How can we continue to outproduce, outperform and outearn the rest of the world?

First, we have to understand why we are wealthier, more productive and more successful than 5 billion other people living in other places.

We are not rich because of natural resources. There are natural resources in plenty of poor nations. It is not because we are a large country in population. India and China have several times our population and are poorer.

We are ahead of the rest of the world in productivity and wealth creation because we have a system of government that - relative to the rest of the world - protects property rights, enforces contracts, leaves us free to work hard and earn without too much of our income confiscated by the government.

Here is the challenge. Not everyone, but many others have figured this out.

The former colonies of the Soviet Union are putting in place flat-rate income taxes. Countries such as Egypt and Peru are establishing property rights under the tutelage of economists like Hernando de Soto, who learned about the importance of property rights from studying American history. Countries that once surrounded themselves with barriers to trade in the form of high tariffs, quotas and non-tariff barriers are opening up to trade and growth.

America cut its corporate income-tax rate to 35 percent in 1986. Then we had one of the lowest corporate rates in the world. And the rest of the world noticed and moved ahead of us. Today, the average corporate tax in Europe is 25 percent. Ireland is at 12.5 percent. Hong Kong’s corporate rate is 15 percent.Even Communist China has a lower corporate tax rate than the United States.

How can we expect to compete when we trash our businesses more than nations we once ridiculed as unable to understand the free market and wealth creation?

In 1986, the United States cut its top individual rate to 28 percent. It had been as high as 90 percent under Franklin Roosevelt and Eisenhower, and 70 percent under Lyndon Johnson and John Kennedy. At 28 percent, we had one of the lowest top individual tax rates in the world. And the world noticed and moved ahead of us. Today, 25 nations have flat-rate income taxes. Russia is at 13 percent. Poland is enacting a 15 percent rate. Macedonia is at 10 percent. Hong Kong is at 15 percent.

We are becoming a high-tax nation - and in 1990, George H.W. Bush raised our income-tax rates to 31 percent and Bill Clinton increased our top marginal tax rate to 39.6 percent. President George W. Bush has only temporarily cut this back to 35 percent. Sen. Barack Obama threatens to jump tax rates to 55 percent for the most productive Americans.

Embedded in any product or service is the cost of labor, materials, capital and government. We don’t want to compete by having the lowest wages. Material costs are worldwide commodity prices. They cost the same. Capital flows to its highest return - you cannot get cheaper capital. We want to compete by having the least-expensive government. A government that protects our property rights, our right of contract and our free labor. And otherwise leaves us alone to invent, produce and create.

Over the years, our government has gotten fat and lazy and expensive and too often destructive of human liberty rather than protective of it.

The steps we need to take to maintain our status as number one are obvious and just as obviously opposed by powerful special interests.

Congress should follow Sen. John McCain’s suggestion that we cut the corporate tax rate to 25 percent as a good start. Our goal should be to have a rate as low as Ireland’s 12.5 percent.

And as John McCain has demanded, Congress should throw away the thousands of pages of tax rules that make up the depreciation schedules for how new investment is taxed and businesses should simply expense all new investment. If you spend the money to buy new equipment, you deduct that cost immediately from this year’s income for tax purposes.

Congress should adopt the proposal of Rep. Paul D. Ryan of Wisconsin to give everyone in America the option of an alternative tax system with two rates, 10 percent and 25 percent, so that we could simplify our tax returns and lower our top rate to 25 percent max.

And America should undo its self-imposed shackles and build 100 new nuclear power plants, stopped now only by green red tape, end the corrupt ethanol subsidy that burns up corn that could reduce world food prices but instead increases pollution and uses more energy to produce less energy. We should allow American ingenuity to explore and drill for oil in Alaska, off the coast of America and throughout the West.

And last, America should unburden itself of the world’s stupidest self-imposed handicap, our billionaire trial lawyers suing businesses and individuals costing America hundreds of billions in higher costs. Those trial lawyers that shutter factories and kill jobs would be better put to use as organ donors.

Grover Norquist is president of Americans for Tax Reform and author of Leave Us Alone - Getting the Government’s Hands Off Our Money, Our Guns, Our Lives.

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