{"id":278,"date":"2012-01-09T11:48:19","date_gmt":"2012-01-09T19:48:19","guid":{"rendered":"http:\/\/savingusmanufacturing.com\/blog\/?p=278"},"modified":"2012-01-09T11:48:19","modified_gmt":"2012-01-09T19:48:19","slug":"what-are-the-republican-candidates%e2%80%99-economic-plans-to-create-jobs","status":"publish","type":"post","link":"https:\/\/savingusmanufacturing.com\/blog\/taxesregulations\/what-are-the-republican-candidates%e2%80%99-economic-plans-to-create-jobs\/","title":{"rendered":"What are the Republican Candidates\u2019 Economic Plans to Create Jobs?"},"content":{"rendered":"

Every Republican candidate has an economic plan they say will create jobs.\u00a0 The truth is that the ability of any president to directly create private sector jobs is very limited, but he can set the focus and present a plan that his\/her administration can follow and solicit the support of Congress and the American people to approve and implement his plan through legislation and funding.\u00a0 The legislation that Congress passes and the President signs can either help or hinder the private sector to create jobs.\u00a0 The funding that Congress allocates provides the fuel to accomplish the plan.<\/p>\n

Most of us are familiar with the old adage that small businesses create up to 80 percent of all jobs; however, the new Census Bureau database called Business Dynamics Statics shows that it\u2019s not so much small businesses that create jobs as it is new businesses<\/strong>.\u00a0 In his book, Great Again<\/a><\/em>, CEO Henry Nothhaft wrote, \u201call the major innovations that powered the American economy to unrivaled prosperity over the last fifty years \u2013 from semiconductors and personal computers to software, biotech, and the Internet \u2013 were all created by small start-ups.\u00a0 So were all of the 40 million new jobs created in this country since 1977\u2026\u201d<\/p>\n

However, not every new business has the potential to grow and produce a significant number of jobs.\u00a0 As Rodney Stark wrote in The Victory of Reason<\/em>, the basis economic fact is \u201call wealth derives from production.\u00a0 It must be grown, dug up, cut down, hunted, herded, fabricated or otherwise created.\u201d\u00a0\u00a0 Because of the jobs multiplier effect, businesses that manufacture a product, whether it\u2019s a hardware or software product, have the highest potential for creating jobs as they grow and succeed.\u00a0 However, these companies will only create American jobs if they manufacture their products or perform their services in the United States.<\/p>\n

Most of the plans of the Republican candidates\u2019 plans involve cutting taxes, cutting government spending, reducing the size of government, eliminating burdensome regulations, and repealing what they consider onerous legislation.\u00a0 Do their specific plans provide a platform to create jobs from production?\u00a0 Do their plans provide incentives to manufacture products in America?\u00a0 If they don\u2019t, what should their plans include?<\/p>\n

Since all of the Republican candidates recommend reducing corporate taxes, let\u2019s examine why this would be beneficial for creating jobs.\u00a0 Right now, American corporations are at a disadvantage compared to other countries:\u00a0 our tax rates are the second highest in the world next to Japan\u2019s, averaging 35 percent at the federal level.<\/p>\n

The Organization for Economic Co-operation and Development (OECD) has conducted a number of empirical studies by OECD economists and others that discovered the best tax rate that maximizes revenue and compliance is 25 percent.\u00a0 The studies found that high corporate income tax rates have the most harmful impact on long-term growth and lowering tax rates can lead to significant productivity gains in the very companies that have the most potential to contribute to economic growth.<\/p>\n

Governor Mitt Romney<\/a> and Ron Paul<\/a> propose reducing corporate tax rates to 25 percent; Governor Perry<\/a> proposes a reduction to 20 percent; Rick Santorum<\/a> to 17.5 percent; while Newt Gingrich<\/a> proposes a reduction to12.5 percent.\u00a0 There were no specific recommendations on former Utah Governor Jon Huntsman\u2019s<\/a> campaign website on reducing corporate taxes.\u00a0 He seems to base his American Jobs Plan predominantly on increasing free trade through additional free trade agreements.<\/p>\n

Three candidates, Governor Romney, Governor Perry, and Rick Santorum propose to create immediate jobs by allowing corporations to \u201crepatriate\u201d profits being held offshore by foreign subsidiaries or divisions at a reduced rate of 5 to 5.5 percent.\u00a0 Over 1.2 trillion dollars could be brought back to America in a matter of days that would provide capital for investment in plants and equipment in the U. S. and hiring more workers to run the equipment.<\/p>\n

Currently, the U. S. operates under what is known as a \u201cworldwide\u201d tax system, meaning that business income is taxed at the U. S. rate regardless of whether the income is earned within American borders or overseas.\u00a0 American companies pay the corporate tax in the host country, and when profits are repatriated back to the U. S., they pay the difference between what was paid to the host country and what would have been owed under the U. S. rate. Our higher corporate tax rate provides an incentive for companies to keep their profits offshore and not repatriate them.\u00a0 \u00a0The U. S. is now the only country in the OECD that adheres to the \u201cworldwide\u201d tax system while imposing a corporate tax rate above 30 percent.\u00a0 A reduced rate for \u201crepatriation\u201d of corporate profits was provided by the Bush administration in 2004, and corporations have been hoping for the opportunity to do so again.\u00a0 To prevent this problem in the future, Governor Romney and Governor Perry propose switching to a \u201cterritorial\u201d tax system in which income is taxed only in the country where it is earned.<\/p>\n

In order to succeed and grow, businesses, and especially manufacturers, need to make long-range plans on allocating funds for R&D and capital investment. \u00a0Thus, businesses would benefit by making the R&D tax credit permanent and either reducing or eliminating the capital gains tax.\u00a0 Governor Romney, Governor Perry, and Newt Gingrich support eliminating the capital gains tax altogether; Ron Paul proposes cutting and simplifying the corporate capital gains tax and Rick Santorum proposes to reduce it to 12 percent.\u00a0 They all support increasing and making permanent the R&D tax credit. \u00a0In addition,\u00a0 all the Republican candidates support eliminating the\u00a0 Estate Tax, aka the Death Tax, which especially hurts small, family owned businesses where the heirs frequently have to sell the business to pay the Estate taxes instead of maintaining the business for the next generation of their family.<\/p>\n

All of the above proposals for changing tax policies are included in the ten immediate recommendations for saving American manufacturing in chapter 10 of my book, Can American Manufacturing be Saved?\u00a0 Why we should and how we can<\/em>.\u00a0 Only one candidate, Governor Romney, has included my top recommendation in his campaign economic plan:\u00a0 enact legislation to address China\u2019s foreign currency manipulation.\u00a0 He also proposes to \u201cdirect the Department of Commerce to assess countervailing duties on Chinese imports if China does not quickly move to float its currency.\u201d\u00a0 Some criticize this proposal by saying it would start a trade war.\u00a0 What they don\u2019t understand is that we are already in a trade war, and China is winning.<\/p>\n

We need a president who recognizes that currency manipulation is just one of the tactics China is using in their economic warfare with the United States.\u00a0 Other tactics they use have been described in my previous blogs and are well documented in the writings of Ian Fletcher, Senior Economist for the Coalition for a Prosperous America<\/a> in his book, Free Trade Doesn\u2019t Work, What should replace it and Why<\/a>,<\/em> and CPA\u2019s blog www.tradereform.org<\/a>.<\/p>\n

In his book Great Again<\/em>, CEO Henry Nothhaft provides additional recommendations of what tax policies should be changed to dramatically help start-up companies:<\/p>\n