High Corporate Taxes Cost Jobs

Those 53 per cent of Americans who paid income taxes can be excused for being angry that General Electric did not pay any corporate income tax on profits of l0.8 billion dollars but claimed a loss for United States operations of 4o8 million and a tax credit of l.l billion dollars. How does GE accomplish this? Well, it has an army of tax avoidance attorneys and accountants, for one thing. GE operates in two divisions, General Electric Capital, and everything else. The everything else, maker of engines, power plants, TV shows and the like, would have paid a 22 per cent tax rate if it was a stand-alone company.

Anger at GE is not only futile but misplaced. Any corporation with a global reach can do the same and many do. The culprit is the United States corporate tax rate that averages 39.5 per cent, second only to Japan's 4l per cent. This high rate not only does not bring in revenue but it discourages foreign investment thus costing jobs. American political leaders are waking up to this and there are some proposals to cut the rate to 25 per cent. Fifteen per cent would be even better. Consider Ireland. Never an industrial giant, Ireland was in bad trouble in the 80's. "We went on a borrowing, spending and taxing spree, and that nearly drove us under," Deputy Prime Minister Mary Harney said. Ireland reduced its corporate tax rate to 12.5 per cent and began to attract foreign companies. Ireland is now the second richest nation in the European Union with a GDP higher than Britian, Germany or France. This is an example we should emulate. High taxes do not equate to high revenue and they discourage creation of jobs.