Burger King is in the news–not because the creepiest looking mascot since Six Flags’ dancing undertaker went off the rails but because they are pursuing a move of their corporate headquarters to the well-known tax haven known as Canada.
People with no sense of American history are wringing their hands over this development, calling the company unpatriotic, among other epithets. Unpatriotic? No, companies are engaging in the most American of all activities–a tax revolt, voting with their Mayflower moving vans.
U.S. corporations operate under the highest tax rate in the world. Canada just lowered theirs to just over 26 percent–a 14 percent savings simply by fleeing north across the border. The truth is that we don’t have a patriotism problem; America has a tax problem.
And here is how to solve it.
Eliminate all corporate tax breaks, and replace the current code with a tiered tax system based upon how many of your workers are employed in the United States. For example, a company that employed fewer than fifty percent of their workforce in America could be taxed at a ten percent rate, one with more than fifty but fewer than seventy five percent employed in America at 7 percent, employing between seventy five and ninety nine percent American workers could be a 3 percent rate, and those small businesses that don’t have any foreign presence would pay zero taxes.
That’s right, the corporate tax rate for the vast majority of American companies would be completely eliminated, allowing them to expand and hire rather than being at a competitive disadvantage with their bigger competitors who can afford armies of lobbyists and accountants to direct tax avoidance strategies.
Naturally, the lobbyists and accountants would oppose it, as there would be less demand for their services, but virtually every corporation in America would get a tax break. These breaks would help expand our nation’s burgeoning advantage over other nations from lower energy costs. An advantage based upon our increased domestic oil and natural gas capabilities has caused America to be called by the Boston Consulting Group, a “rising star in manufacturing.”
Imagine the decisions that would be made in board rooms around the world if our nation’s corporate tax system was turned on its head, away from sweetheart giveaways to promote favored industries and instead focused upon one core economic goal–to create an incentive to hire American workers. This system would have the effect of offsetting any perceived or real labor cost advantages to overseas manufacturing, allowing our nation’s economic system to grow and the U.S. worker to once again prosper.
As Labor Day approaches, however, it must be remembered that this tax system would not be about either Wall Street or Main Street; it would be about Maple Street, where Americans live, struggle, and seek a better future for themselves and their children.
This system would be about making the 7.5 million who are struggling because they can only find part-time work our nation’s priority. It is about putting the almost 10 million who are unemployed, along with the millions who have given up on ever getting a job, renewed hope that they have a bright future. This system is designed to restore America’s economic preeminence in the world by replacing cozy backroom tax break deals with a corporate tax code that incentivizes companies to invest here rather than abroad. It also promotes a tax system that does not unduly choose winners and losers, putting multi-national corporations at a large enough disadvantage that they would be discouraged from investing, competing, and hiring here.
In the end, American workers win, a vast majority of businesses win, and because the tax code would finally make job creation a national priority, America as a whole would grow stronger as its people are at work and are thriving.
Just a modest idea as we approach Labor Day, to use our tax code to help put America back to work.
The author (@rmanning957) is Vice President of Public Policy and Communications for Americans for Limited Government.