bring jobs home to america - presentation 062111 pdf
TRANSCRIPT
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Bring Jobs Home to AmericaReplace the job-killing,
Corporate Tax System with a
border-adjusted, business
consumption tax.*
*As originally proposed by Austin businessman David Hartman
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Bring Jobs Home to America
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Since 1974, manufacturing employment
has fallen from 24% of total U.S. jobs toless than 9% in 2011.
Manufacturing Employment
Total US Non-farm Employment
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Bring Jobs Home to America
Since the official start of the most recent
recession
Dec-0
7
Jan-0
8
Feb
-08
Mar-
Apr-08
May-
Jun-0
8
Jul-08
Aug-0
8
Sep-0
8
Oct-08
Nov-0
8
Dec-0
8
Jan-0
9
Feb
-09
Mar-
Apr-09
May-
Jun-0
9
Jul-09
Aug-0
9
Sep-0
9
Oct-09
Nov-0
9
Dec-0
9
Jan-1
0
Feb
-10
Mar-
Apr-10
May-
Jun-1
0
Jul-10
Aug-1
0
Sep-1
0
Oct-10
Nov-1
0
Dec-1
0
Jan-1
1
Feb
-11
Mar-
Apr-11
Jobs in the manufacturing fellfurther proportionally than
any other sector of the
economy except construction.
In April 2011,
Manufacturing jobsremain nearly 15%
below pre-recession
levels, while total U.S.
non-farm employment
has regained 95% of
levels on Dec. 2007.
Manufacturing Job Changes
Total US Non-farm Job Changes
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10000
11000
12000
13000
14000
15000
16000
17000
18000
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Bring Jobs Home to America
U.S. Manufacturing job losses over the
last decade Essentially all (U.S.) joblosses are high wage
manufacturing, and most gains
are in low-wage services. In
essence the U.S. economy isrestructuring downward, while
the Chinese economy is
restructuring upward.
-Kurt Richebcher
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0.0025
0.0075
0.0125
0.0175
0.0225
0.0275
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Machinery
Other
Transportation
Equipment
Electrical Equipment,appliances, and
components
Computer and
electronic products
Chemical Products
Motor vehicles,
bodies and
trailers, and parts
Source: Bureau of Economic Analysis Capital Goods as % of GDP (all industries)
Bring Jobs Home to America
Decline of Capital Goods Made in the U.S.A.
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The Business Consumption Tax (BCT) is a revenue-neutral
replacement of the Corporate Income Tax and the employer
portion of the payroll tax.
All goods and services coming into the U.S. pay the 8% tax;
all companies exporting receive a comparable tax credit.
Exported goods and services would not be subject to the BCT
and would receive rebates or credits on BCT payments madeon capital inputs.
Bring Jobs Home to America
Leveling the Playing Field with an 8%
Business Consumption Tax (BCT)
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Bring Jobs Home to America
Border-Adjusted Business Consumption Tax (BCT)
What is a BCT?A consumption tax collected on goods and services entering the country
(and domestic sales) and rebated for taxes paid on capital purchases.
Who uses it?Nearly every OECD nation except the U.S.
What are the advantages?BCTs benefit exports over imports because outside sales do not have to
pay the home nations BCT. The increased revenues from BCTs also haveallowed our largest foreign competitors to lower statutory and effective
corporate income tax rates.
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Bring Jobs Home to America
U.S. Tax Disadvantages with Our Trading
CompetitorsNation(s) Border-Adjusted Tax Rate
United Kingdom 20%
France 19.6%
Germany 19%
EU 15 Avg. 20.77%
China 17%
Canada 5 to 13%
Mexico 16%
India 12.5%
Rates for India and Canada vary by region/province. Canada's current VAT rate
is 5% (down from 7%) - harmonized tax rate includes province sales tax.
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Bring Jobs Home to America
For an American-made Cadillac seeking to compete on the German market with a
Mercedes Benz of comparable value:
The Cadillac sells for $50,000 in the U.S. but is hit at the German border with a 19%
border-adjusted tax. Selling the same car in Germany puts the U.S. manufacturer at a
19% disadvantage against the European-made Mercedes.
Meanwhile, the Mercedes manufacturer competing in the U.S. does not have to pay ourcorporate income tax or employer portion of the payroll tax, nor does it have to pay a
border-adjusted tax since the U.S. doesnt have one.
E.g., Auto Sales between U.S. and Germany
Producer US Market German Market
United States
(Cadillac)
Add 19%
$50,000 $59,500
Foreign VAT
Germany
(Mercedes)
Subtract 19%
$42,016 $50,000
Foreign VAT
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Between state and federal income taxes, U.S. corporations face
statutory rates roughly 14 percentage points above the average
for all OECD nations.
The revenues raised by BCTs have allowed many exportingnations to increase competitiveness by lowering corporate
income taxes or tailoring tax to protect specific industries.
By eliminating the corporate income tax and allowing for the
expensing of capital, the U.S. could better compete for newbusinesses and capital investment.
Bring Jobs Home to America
Reducing the Corporate Tax Burden
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28%
20%
23%
17%
22%
0%
5%
10%
15%
20%
25%
30%
United States 58 Countries,
excluding U.S.
OECD-28, exc.
U.S.
Non-OECD
Countries
EU-18
Average Book Effective Tax Rates, 2006-2009
Bring Jobs Home to America
Reducing the Corporate Tax Burden
A recent study by
PricewaterhouseCooper
found that [A]mong the
companies on the Forbes
Global 2000 list for 2010,
U.S.-headquartered
companies had an average
financial statement
effective tax rate of 27.7
percent over the 2006-2009
period, compared to an
average rate of 19.5 percentfor their foreign-
headquartered
counterparts.Business Roundtable Study: Global Effective Tax Rates, April 14, 2011. PwC calculationsbased on data from S&Ps Global Vantage database.
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Bring Jobs Home to America
Changing the way we tax U.S.-based
businesses will benefit small businessesA joint study by IBM
and the Internal
Revenue Service
found that businesseswith fewer
employees have a
significantly higher
compliance cost for
paying taxes underthe current structure.
$7,274.00
$2,155.00
$1,348.50$1,081.00
$768.50
$296.50
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
1 to 5
employees
6 to 10
employees
11 to 15
employees
15 to 25
employees
26 to 50
employees
More than 50
employees
Per Employee Cost of Tax Compliance
Source: Estimates of U.S. Federal Income Tax Compliance for Small Businesses
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250,000
750,000
1,250,000
1,750,000
2,250,000
2,750,000
3,250,000
3,750,000
4,250,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Business Tax Classification Trends
C Corporations S Corporations Partnerships
Bring Jobs Home to America
The corporate income tax encourages tax-driven
decision making rather than business-based decisions
The chart to the
right illustrates
the number of
businesses thathave changed
tax status to
avoid double
taxation on
personalincomes and
capital gains.
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5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
Taxes as a Share of Total Government Receipts
Individual Income Taxes Corporate Income Taxes Social Insurance and Retirement Receipts
Bring Jobs Home to America
Corporate Income Tax: An Inefficient Revenue
Source
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The current tax system punitively taxes capital investment, employment, and
savings in the U.S. It encourages tax-driven strategies of debt accumulation
because debt is tax-deductible.
A study from the American Enterprise Institute showed a negative correlation
between high Corporate Income Taxes and workers wages (Hassett and Mathur
2010).
I fundamentally don't understand the logic of corporate income taxes, said
C. Larry Pope, CEO of Smithfield Foods. If I have a 35% tax, all I do is take
that 35% tax and I transfer it into the price of bacon and the price of pork
chops. (Wall St. Journal, April 2011)
The Corporate Income Tax is only collected
by Corporations
Bring Jobs Home to America
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Bring Jobs Home to America
For clarity, the exampleuses a 10-percent BCT.
How a Business Consumption Tax works
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Industries receive a rebate or credit on exported goods leaving the country, so
as to avoid double taxation on foreign consumption taxes.
The tax is levied in full on imports entering the U.S. the same as in other
countries we export to.
Foreign exporter is
taxed 8% at the border
U.S. exporter receives a
tax abatement on
goods sold overseas.
Bring Jobs Home to America
How the Business Consumption Tax works from
an export-import standpoint
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Eliminate the Corporate Income Tax and employer portion of the
payroll taxes, and replace with an 8% border-adjusted, Business
Consumption Tax.
It is border-adjusted, i.e. all goods and services coming into the U.S.
pay the 8% tax; all companies exporting receive a comparable taxcredit.
Exported goods and services would not be subject to the VAT and
would receive rebates or credits on foreign VAT payments.
Changing our corporate tax system in this fashion would berevenue-neutral, and, in fact, revenues would grow as jobs return to
America and the private sector starts growing again.
Bring Jobs Home to America
Bring Jobs Home to America
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Bring Jobs Home to America
Bring Jobs Home to AmericaTom Pauken is Chairman of the Texas Workforce Commission (TWC), where he has served
since being appointed by Governor Rick Perry in March 2008.He served in the White House Counsels Office under President Reagan, and was appointed by
the President to serve as Director of ACTION, now known as AmeriCorps. At ACTION, Mr. Pauken
founded the Vietnam Veterans Leadership Program and implemented Nancy Reagans Just Say No
to Drugs campaign. For his meritorious service as director of program, he was awarded the Ronald
Reagan Medal of Honor by his fellow Reagan administration alumni. In 2007, he served as
Chairman of the Governors Task Force on Appraisal Reform.
Chairman Pauken is a United States Army veteran. He received a commission in Military
Intelligence and served in Vietnam as a Province Intelligence Officer and as a senior analyst for the
Office of Strategic Research Analysis.
Founder and President of Dallas-based TWP Inc. Chairman Pauken has also served as a board
member of various public and private companies.
Chairman Pauken is the author of the book, The Thirty Years War: The Politics of the Sixties
Generation, and most recently,Bringing America Home: How America Lost Her Way and How WeCan Find Our Way Back. He holds a bachelors degree from Georgetown University and a law
degree from Southern Methodist University.
He and his wife, the former Ida Ayala, have seven children and 12 grandchildren.