During a Senate Budget Committee hearing today titled “Tax Reform: A Necessary Component for Restoring Fiscal Responsibility,” ranking member Jeff Sessions (R., Ala.) made an impassioned case for why corporate-tax rates must be significantly reduced — in addition to any general reform measures designed to simplify the tax code — if the United States wants to remain an attractive place to do business. Simply doing that, he argued, would go a long way toward bringing down the unemployment rate....As readers of this blog know, I agree wholeheartedly with Sen. Sessions that we need to reduce taxes (and other government-induced burdens) on American companies to help them better compete and thrive in today's global economy. However, Sen. Sessions' views on reducing corporate "burdens" would be a lot more believable if he weren't singlehandedly responsible for increasing taxes on American business to the tune of several hundred million dollars per year.
"The problem is far more serious than that. We have, even in real rate terms, one of the highest, if not the highest corporate [tax] rate in the developed world. Corporations are making decisions every day: where to expand, where to hire workers…"
"This is not academic. This is going on every day. We have an unemployment rate that is unacceptable and to have the highest corporate tax rate virtually in the world — and other nations are seeing the light in reducing it — and we remain high?"
"So even if we eliminate certain deductions and have a flat rate that appears lower, it seems to my simple mind that we’ve got no less real burden on the corporate community than we had before."
As I noted in December, Sen. Sessions alone blocked the 2011 extension of the Generalized System of Preferences (GSP) - a longstanding program that lowers or eliminates tariffs (which are taxes, of course) on developing country imports, including a lot of industrial inputs and equipment used by American businesses - because he couldn't get Congress and the administration to agree to increase tariffs (taxes) under the GSP on sleeping bags from Bangladesh in order to protect a small Alabama sleeping bag manufacturer from duty-free import competition. So he pitched a fit, put a "hold" on the GSP legislation, and the program expired. (And per the New York Times, it appears that he's still at it.)
Cato's Sallie James explains that the cause and effect of Sessions' actions are straightforward and significant:
The Generalized System of Preferences is a federal program that offers duty-free access to the U.S. market to certain goods from certain developing countries. Or, I should say, was a federal program, because it expired on December 31. My opinion of the program is ambivalent at best, but one cannot deny that the program brings real cost savings to American consumers and businesses -- to the tune of $580 million a year -- through lower import duties....
But those duty savings are, apparently, worthless in the face of special interest politics....
The GSP expired and millions of U.S. consumers and businesses (not to mention developing country exporters) are being penalized to save a hypothetical 20 (that's two-zero) jobs that don't even exist yet. The jobs being lost by businesses that depend on the GSP to keep them competitive are, apparently, not worth consideration. And as for consumers' buying power being eroded, well forget it.By my math, that's about $29 million in increased taxes per hypothetical new job! While that
Behr Dayton manufactures engine cooling and air conditioning technology for the automotive industry in a 1.1 million square foot facility in Dayton, Ohio. According to Heinz-J. Otto, President and CEO of Behr America, the 1,000 workers in Dayton “make engine-cooling and air-conditioning components and systems for cars built by GM, Ford and Chrysler, U.S.-built cars by BMW and Mercedes, and heavy trucks produced by Freightliner and International.”Sen. Sessions selfish, nakedly-political actions have forced US manufacturers like Behr Dayton to face more than $5 million in new taxes in 2011. Other manufacturers face similar pains, and even if (when?) GSP is eventually renewed and applied retroactively to January 2011, it's quite likely that many of these American companies will have already made other, more expensive sourcing plans (and that planning ain't exactly a costless exercise itself, you know). And, naturally, with new taxes and more uncertainty come fewer jobs.
In addition to being one of Dayton’s largest manufacturing employers, Behr is one of the most frequent importers of aluminum foil from Brazil. In the first 11 months of 2010, 99.98 percent of those imports entered the United States duty free under the GSP....
GSP saved manufacturers like Behr Dayton more than $2.5 million on imports from Brazil. Surprisingly, Brazil isn’t even the largest supplier of aluminum foil under GSP. That honor goes to tiny Armenia. About a quarter of the size of Ohio and with a population just over 3 million, Armenia exported more than $58 million worth of aluminum foil under GSP through November 2010 and saved American companies another $3 million.
The junior Senator from Alabama talks a big game about eliminating taxes and other burdens on American businesses in order to improve the US economy and decrease unemployment. And he's right: those burdens definitely need to be removed, and such reform could really help jumpstart our economy. But if Sen. Sessions really believes all that great free market rhetoric, he can - and should - prove it.
Releasing his GSP hostages would be a great, and easy, place for the Senator to start.
UPDATE: The WSJ has more here.