WSJ – U.S. Energy Firms Rewarded With Tax Deferrals and A Crony Capitalism Showdown

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Friday’s WSJ featured two excellent articles that spotlight the challenges facing our leaders in restoring our nation’s competitiveness – ‘U.S. Energy Firms Rewarded With Tax Deferrals’ by Daniel Gilbert & ‘A Crony Capitalism Showdown’ by Kim Strassel.

The notion of each article relates to the competitiveness of our nation.  While some on the ‘right’ may read Mr. Gilbert’s article as confirmation of a ‘left tilt’ to the Wall Street Journal, many fiscal conservatives, including myself, do not see it that way.

U.S. Corporate Tax Rate is One of the Highest in the World at 35%

Taxpayers for Common Sense logoOur legislators, on the right and the left can agree that the “U.S. corporate statutory tax rate is one of the highest in the world at 35%”*, and that U.S. and multinational corporations are becoming increasingly clever with tax avoidance strategies.  The problem is compounded by our government’s response – making the tax code more complex, “increasing the administrative burden for small companies.”**

In ‘U.S. Energy Firms Rewarded With Tax Deferrals’ , Mr. Gilbert writes that “over the past five years, 20 big publicly traded U.S. oil and gas producers paid a combined $15.6 billion in U.S. income tax, or 11.7% of their American earnings, and deferred $16.5 billion, according to the nonpartisan Taxpayers for Common Sense. Together, the 20 had an effective tax rate of 24% on their U.S. income, below the statutory 35% rate and well below the 46.2% those with overseas operations paid abroad”.

As a Republican, regardless of the top corporate tax rate, energy companies get great tax advantages that others don’t.  Tomorrow, it will be another industry.  While I hold high the national security implications of energy independence, the article does a good job of highlighting the hypocrisy of crony capitalism – whom neither the right nor the left have their hands clean.

A Crony Capitalism Showdown

On the same day, Kim Strassel, in the WSJ editorial, ‘A Crony Capitalism Showdown’ writes:  “GOP voters overhauled their party in 2010, sending to the House a new generation of Republicans committed to smaller government, freer markets and less corporate welfare.”

Ms. Strassel features Congressman Mike Pompeo and the congressional primary in Kansas’ Fourth District, noting that this primary “will signal the direction of the GOP.” “Companies should have customers, not political patrons” that shovel “grants to politically connected communities,” says Congressman Pompeo.  “Unprioritized porking has helped create a spending culture that built $17 trillion in debt.”

Elbowing to the Front of the Line

Complicated tax shields, whether the beneficiaries are on the right or the left, are endemic of our nation’s fiscal irresponsibility that stands to compromise America’s sovereignty and our freedoms.  Faced with the rising tide of global competitiveness and decades of national malfeasance, our businesses and our citizens seek advantages by elbowing one another to get to the front of the line for Washington DC hand-outs.  Legislators (not leaders) are back-stopped by an unlimited check-book (the deficit and national debt), enabling them to postpone confessing to their constituents that we are living beyond our means; all the while heroically blaming the ‘other party’ for our nation’s demise and foreign policy challenges.

Can our legislators leave their respective echo chambers and lift their sights to unite?  Why is there is a line at all to restore our competitiveness?

Picture of the Economist LogoHigh Corporate Tax Rates Discourage Investment & Entrepreneurship

“Studies have shown that high corporate-tax rates discourage business investment and entrepreneurship, and countries that try to squeeze their firms too hard often have larger black (or informal) economies.”, notes the Economist.  “In a globalized world, high taxes may simply lead businesses to move to places that offer more competitive rates or tax breaks to companies that set up operations within their borders.”**  The chart below highlights the range of corporate tax rates by geography.

Economist Chart - Corporate Tax Revenus as a Percent of GDP

Source: The Economist, OECD, PwC

Today, experts on the left think the economy won’t expand without more government control, while those on the right say too much government control has made businesses afraid to take risks. Yet the United States of America can survive, reinvent itself; even thrive by simplifying, simplifying, simplifying.

Restoring America’s Prosperity Is Not Magic, Just Math

Before a real crisis besets us, our President and our legislators, Our Leaders, should come together to reform the tax code, balance the budget, and quit compromising our nation’s competitiveness through reliance on limitless national debt.  Fiscal responsibility is not a ‘right’ or ‘left’ issue.  The leaders that America needs are grateful for the circumstances that confront them, duty bound to work together, and honored to bear this responsibility.

As Warren Buffet notes, “Should you find yourself in a chronically leaky boat, energy devoted to changing vessels is more productive than energy devoted to patching leaks.”

Restoring America’s prosperity is not magic, it is just math.

Sources:

By Nick Mavrick

You can find Nick Mavrick on Google+

Intelligent Response specializes in operationalizing Predictive Analytics, Cause Marketing and Digital Advocacy in Washington DC.

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