Sunday, January 20, 2008

Bachmann’s Politics Undermines Our Chance at Prosperity

Robert Kuttner writes in his new book, The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity , that the median income of working-age families has actually fallen by 5.4 percent over the last seven years, adjusted for inflation, even as the gross domestic product has grown by 18 percent.

Worse yet, our buying power is being eroded. Average Hourly Earnings grew 3.7 percent in 2007, but the Consumer Price Index rose 4.2 percent, meaning families dipped into their savings or increased borrowing just to stay even.

This assessment is not lost on Minnesota’s Congresswoman Michele Bachmann - "We work long hours and sometimes even two jobs to provide for our families. But the families across our state and the nation are feeling anxiety. The costs of healthcare, gasoline, tuition, and other necessities are rising. That's why it's more important than ever to provide workers and small businesses with the tools they need to create more jobs and improve the economic future for American families.”

While Bachmann recognizes that something needs to be done, her solution is that Corporate Tax Rates need to be reduced.


Her legislation, the Middle Class Job Protection Act, is designed to reduce the corporate tax rate from 35 to 25 percent and provide 50 percent bonus depreciation and increased Section 179 expensing over the next two years. Without getting into the particulars, it should be noted that cutting corporate tax rates is the battle cry of the Republican Presidential candidates. Fred Thompson was first to announce a 27% rate, then Rudy Giuliani and John McCain at 25% and not to be outdone, Mitt Romney’s plan is a to get to 20 percent over two years.

First, not every corporation pays taxes. It doesn’t matter what the rate is, if corporations are not paying taxes. As this report documents, American corporations have a variety of subsidies and tax breaks that allow them to pay no income taxes. The Study was of the 2001-2003 taxation of 275 of the Fortune 500 companies. The Study reports, for example, that "Eighty-two of the 275 companies, almost a third of the total, paid zero or less in federal income taxes in at least one year from 2001 to 2003."; and that "Twenty-eight corporations enjoyed negative federal income tax rates over the entire 2001-2003 period." That’s why it is comical that anyone even suggest cutting the corporate tax rate.

Second, I thought Small business is the backbone of the American economy … the Job Creators. Since many sole proprietorships pay based on individual income tax rates using Schedule C, Bachmann’s plan will not help them. Also, there are the S corporations which have increased substantially since the 2001 and 2003 reduction of individual income tax rates.

Third, if you are a small business that is paying taxes, the tax may be already below the 35% rate. As this study shows, 96.3% of small businesses do not pay the top rate.

A fair question to ask of the Congresswoman, is if the costs of healthcare, gasoline, tuition, and other necessities are rising, why aren’t you offering legislation that directly affects those issues ?

Here’s my alternative. If gas prices is the problem, temporarily eliminate the Federal Motor Fuel Excise Tax. The per gallon Federal Motor Fuel Excise Tax is 18.4 cents on gasoline, 13.6 cents on LPG, 24.4 cents on diesel fuel, 18.4 cents on gasohol, 19.4 cents on aviation gas, and 4.4 cents on jet fuel.

First, this will impact virtually everyone … directly and indirectly. Working families and retirees will see it when they fill up their tanks and businesses will no longer have to charge a surcharge. Truckers will see a reduction. Small business and big business will all benefit.

Second, these monies go to the Federal Highway Trust Fund. The Trust Fund dollars are then re-evaluated and redistributed back to the states. This is the second benefit. If the Trust Fund does not have the source of revenue but still the same desire for good roads and bridges, construction projects will be scrutinized. No longer will there be Bridges to Nowhere. That's right, pork-barrel spending will face serious scrutiny.

The other suggestion would be relate to the underlying cause of this “recession”. The Congresswoman fails to mention the sub-prime mortgage crisis in her litany of problems facing working families. That may be because Republican Bachmann voted against HR 3648 - Mortgage Debt Relief Forgiveness Act of 2007 even though 165 other Republicans supported this bill.
The suggestion would be to encourage the Federal Reserve to reduce the prevalent interest rates by one point. That would immediately send a message to Wall Street. Immediately, lower loan rates would help businesses and consumers.

If only Congresswoman Bachmann would value the working families as much as she values Corporations.

1 comment:

Froggie said...

I don't see pork-barrel spending as being reduced if the gas taxes get temporarily lifted. Not the way Congress operates.

Furthermore, we're critically underfunding transportation as it is, and reducing revenue further would make a bad situation just that much worse.