In a recent letter to a constituent, U.S. Sen. Amy Klobuchar (D. Minn) explained why she voted against the Jobs Act. Her comments betray her massive ignorance of economics and the operation of the tax code. Her two primary claims are that the Jobs Act will “add $1.5 trillion to the debt, and create new loopholes that could encourage companies to move jobs overseas.” She also complains that the benefits of the Jobs Act are merely temporary.
For starters, her claim that the Jobs Act will add $1.5 trillion to the deficit is pure non-sense. It is a well-settled economic principal that you don’t raise revenue by raising tax rates. Raising rates always has the effect of reducing economic activity. What you tax, you get less of. When you tax income and productivity, you get less income and productivity. When you reduce tax rates, there’s more incentive to work harder because people will keep more of what they earn. It’s immutable human nature. Harder work means more income, which means more tax revenue, even at lower rates.
Tax cuts, no matter how deep, NEVER cause deficits. There’s only one reason for deficits—and that’s spending. When you spend more than you take in, you get a deficit. The best example is what happened after Reagan’s first two tax reform measures passed in 1981 and 1982. Federal revenue about doubled by 1989. But deficits kept climbing. Why? During that same period, Democrats in the House and Senate—Klobuchar’s predecessors—increased spending by over 4 times. No tax increase can possibly keep up with that kind of spending.
Her claim that the law could create loopholes for corporations to send jobs overseas is nothing but a pure rant, not supported by even a modicum of evidence. She could not possibly have read the bill. The Jobs Act not only cut the corporate tax rate from 35% (the highest in the industrialized world) to 21%, but created a one-time repatriation tax of 15% on the cash corporations bring back from overseas. By reducing the rate considerably, some revenue is collected versus none.
The incentives are obvious. The lower corporate tax rate provides profound motivation for companies to operate in the U.S., not abroad, where most corporate tax rates are now higher than the U.S.’s rate. The Jobs Act has thus transformed America into a bit of a tax haven nation. Moreover, the one-time repatriation tax will encourage U.S. companies to bring back some or all of the trillions of dollars they have stashed overseas.
Don’t think it won’t work. Apple Computers, for example, announced on January 17, 2018, that it plans to bring back the vast majority of the $252 billion in cash from offshore profits that it’s been hoarding there for years. In fact, about 94% of all of Apple’s cash is held offshore. How much of that money do you think Apple would have brought back if the rate stayed at $35%? In fact, you could have set a rate of 100% and you wouldn’t have raised a nickel because Apple simply would not have brought the money back—ever. On the other hand, Apple will pay a tax of $38 billion, money the U.S. Treasury never would have seen without this tax bill.
What will the mean, greedy, impersonal corporation do with the money? Apple says it plans to add up to 20,000 new jobs and will build a new domestic campus somewhere in the U.S. Plus, it will spend about $10 billion on new data centers in the U.S. Apple is already the U.S.’s largest single taxpayer, and with this one-time repatriation tax and the increased employment taxes from 20,000 new employees, Apple will pay even more going forward.
And this phenomenon is not peculiar to Apple. There is a growing list of companies announcing that they will add employees and infrastructure as a direct result of the Jobs Act. Just for example:
- Bayer will invest $8 billion in the U.S. and create 3,000 jobs
- Amazon will create 100,000 jobs over the next eighteen months
- Wal-Mart will spend $6.8 billion and create 34,000 more jobs
- Home Depot is creating 80,000 more jobs
- ATT is giving $1,000 bonuses to more than 200,000 employees and is investing $1 billion
- Sprint is brining 5,000 jobs back to the U.S. and creating 3,000 new jobs
- Disney will give 125,000 employees $1,000 bonuses
- Ford is canceling its $1.6 billion Mexico plant and will expand in Michigan instead, and add 700 new employees
- GM will invest $1 billion and create 1,000 jobs
- Toyota will invest $10 billion over the next five years
- Stanly Black and Decker will open a $35 million dollar plant
- U.S. Steel will rehire laid-off workers, add 10,000 new jobs, and invest $10 billion
All of this will happen in the U.S. – not in foreign countries. And this is just a partial list of companies that announced growth plans in America because of the Jobs Act.
Do not be fooled by the profound economic ignorance displayed by Klobuchar and those of her ilk. Tax cuts are always good for the economy—period.
Klobuchar said she wants to bring corporate cash back to the U.S. but qualified that remark, saying, “I believe at least part of those resources should be used to strengthen our infrastructure.” What infrastructure is she talking about? From the above list, it is clear that businesses across the country will make substantial investments in infrastructure.
No, what she means is she wants the government to get its hands on the money. Like most of those on the Left, she doesn’t believe that people or companies are entitled to keep what they earn. She clearly believes the government owns it all. If that were not the case, how could she turn a blind eye to the remarkable job growth and infrastructure investments represented on just the partial list set out above?
Her remark that she was against the Jobs Act because the provisions are temporary is an absolute fraud. True, temporary provisions are not good and I don’t support them either. But the one and only reason the provisions are temporary is because those in her party—Democrats—simply would have gone along with any of this without them. That’s exactly why the Bush cuts of 2001 and 2003 were also all temporary. Otherwise, Leftist Democrats would have done everything possible to torpedo the cuts.
The clearest revelation coming from Klobuchar’s comments is that she does not care about American citizens and businesses. She only cares about vesting more money and power in the hands of the central government. She is blind and ignorant of economic realities. She singularly reveals why Leftist Democrats will never get behind true tax reform that puts money and power back into the hand of producers, where it belongs.