New Business Taxes = U.S. Jobs and Economic Growth

Summary: Two new taxes are proposed to replace present business taxes. A small flat tax assures businesses pay for general benefits they receive from publically financed functions. A value added tax (VAT) that is zero or small for value added within the U.S. and higher for value added offshore will drive investments and jobs to the U.S. and keep U.S. businesses globally competitive.

Taxes and other costs, i.e., regulations, entitlement mandates, and wages, are driving large and small U.S businesses to move functions, jobs, and profits offshore. Today’s U.S. corporate taxes constituting 15% of all tax revenues are the highest in the industrialized world, and new personal income tax rate increases will hurt many small businesses. Business taxes cannot and should not be used to solve our fiscal problems. Strategically lowering taxes on businesses will create job and economic growth opportunities within the U.S.

Some taxes on businesses are appropriate since businesses too benefit from many publically financed functions, but today’s taxes are counterproductive. A small flat tax (e.g., ten percent) paid on profits assures businesses contribute to infrastructure and other government provided benefits they receive. A goods and services value added tax (VAT) based upon where the value is added provides a “level the playing field” for jobs and investments in the U.S. The VAT for value added within the U.S would be small or zero, and the VAT for offshore value added would be significantly larger. Tax offsets and exemptions for paying foreign taxes, research in the U.S. and similar exemptions should continue only if they satisfy the goal to create job and economic growth opportunities.

Replacing the present business taxes with a flat tax and a selective VAT would significant change U.S. businesses’ investment and labor models. This business two-tax system would quickly drive millions of manufacturing and skilled labor jobs to the U.S., increase revenues to eliminate our deficits, reduce the U.S.’s trade imbalance, and put our nation on a sound foundation for future growth. Any business tax revenues lost would be more than offset by taxes paid by more working citizens.

Negative impacts should be minimal. Costs for offshore goods and services to U.S. citizens may increase slightly, but would be more than offset by U.S. jobs. Some U.S. businesses will lose their exemptions, but should have less political uncertainty, and be more competitive worldwide. Government revenue uncertainties may require “tweaking” to optimize job and economic growth opportunities, and assure the new taxes provide expected tax revenues.

Today our nation’s future looks bleak. With tax changes, spending cuts and controls, and technology advances, i.e., gas and oil energy independence due to hydraulic fracturing technology, the future can become wonderfully exciting again.  Adoption of this principles-based tax system for businesses will help jump-start future jobs and economic growth. 

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Dr. Cleland’s Ph.D. is from Purdue University where he specialized in complex systems theory. His technical training and experiences includes analyses of many types of systems, involvement with numerous federal, state, and local agencies, and management of a broad set of set of professionals, services, and trades people. He has managed scientists, engineers, policemen, firefighters, environment, health, safety and emergency planning experts, building trades and maintenance crafts personnel, and others.

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February 2013
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