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JFK was wise beyond his years. Today, JFK would be labeled a conservative. The fact is that our economy is sick so we need to put more pay in employee’s pockets with a permanent tax fix. What we do not need to do is put more pay in freeloader’s pockets for purposes, which Governor Christie suggests include being a couch potato, perhaps smothered in French Fries and gravy. When you pay people for not working, you get a lot more looking for the same pay for the same work.
Ron Paul says that “One thing is clear: The Founding Fathers never intended a nation where citizens would pay nearly half of everything they earn to the government.” With 46% of Americans paying no tax at all, how is that a good deal for this country?
The US Tax Code is a taxpayers joke and a lobbyists dream. With over 75,000 pages of exemptions and exceptions, written by lobbyists, it is both a public outrage and nightmare. All corporate welfare and subsidies must be eliminated. The best way to do it is to restructure the entire tax code with permanent changes.
Do corporate income taxes really matter?
In the 1950’s, the Federal Corporate Income Tax provided 30% of the country’s revenue. Now, with more powerful corporations than ever, and lobbyists demanding more and more favors from politicians, there are so many deductions and subsidies that the corporate tax now provides just 6.5% of federal revenue. Corporations, the same corporations that demanded citizenship long ago, need to now earn that citizenship by becoming more American. Reducing the corporate tax rate to attract foreign investment and to incentivize American corporations to produce in America is the overarching objective of reducing the corporate tax rate in the RRR plan. Any revenue lost from such a cut will come back by the taxation of the ample dividends that will be paid.
The corporate tax impact on the Federal Government is minimal. We are talking about just 6.5% of revenue. Reducing the tax rate to an awesomely small amount, without permitting special deductions or subsidies, will continue to provide substantial revenue to the treasury—perhaps even more than we get today. Yes, I would speculate revenue from corporations would go up by restructuring the code and reducing the rate.
Overall, a restructuring of the corporate tax rate as part of an overall tax restructuring is the best notion. Taxes should be broad-based and the rates should be relatively low. In terms of the RRR plan, our objective is not just to reduce the rates so US corporations can be more profitable, it is to attract US corporations to once again operate in America.
The most important factor is to create a tax system so that companies from all over the world, including American businesses that have offshored operations will want to do business in the new America. The new America will be a business bonanza in which corporate / business taxes are low, yet government revenue is the same or greater. If we do our best with the RRR plan, and companies like Apple choose not to come back–fine! It is time that America began to worry about American citizens before corporations.
Reduce the domestic corporate tax rate to 8%
A big carrot for business is to reduce the corporate tax rate to 8% for both domestic corporations and foreign corporations. Because this plan is about putting Americans back to work in good jobs, foreign companies that build plants and offices in America and who hire Americans will also get the reduced tax rate and a thank you from the Federal Government. Like me, many Americans are unhappy that so many “faux American” Corporations walked away from the United States and left so many unemployed in their wake. My recommendation is that nothing special be done for any American Company that decides to come back because of RRR or for any other reason.
I would also say no special punishment should be meted. However, I would like to see corporations on their own choosing to set up funds for good American causes. For example, it would be nice if corporations used some of their tax savings to help students pay for their student loans, or to help state unemployment funds stay afloat, or to provide some free goods to charity. For these kind works, American corporations should receive thank you’s from the government and the people.
Many know that corporations gained their American personhood in the famous 1886 Supreme Court case called Santa Clara County v. Southern Pacific. The founders never wanted to give corporations an inch. In fact, they were illegal after the Revolution for many years. Give them an inch and they will take a mile. Can you imagine if there were debates on personhood by the founders about corporations?
About 100 years after the Constitution, the slippery slope saw corporations emerge in America from minimal entities to having more power than even the monopolistic British East India Company, the bane of the colonists. The founders would have thrown over the Tea a number of additional times, rather than ever give in to corporate personhood.
Look what has happened. Other than corporate officers or stockholders; who in America, has really gained from their existence? Corporations over the last thirty years have stolen away a lot of what makes America America simply by pure greed. They have taken our jobs and much of our strength as a country and they have diminished America’s standing in the world.
Since becoming persons, US Corporations have simply been bad American citizens to say the least. As real flesh bearing persons, We the People are challenged to take control of our government, which was founded to be Of the People and By the People. Corporations are so much more powerful as entities as individuals, and in America, other than corporations, no group is endowed with any power. We are a country of individuals, and only if we have an honest government do things go well for Americans. Enough said!
Because the Constitution gives us strength, when together we institute the RRR plan, which gives corporations the gift of a substantially lower corporate tax rate, I sincerely hope that corporations do choose to become much better citizens. And for that, I will be the first to sing their praises. If not, then we must elect politicians who understand the purpose of the stick rather than the carrot.
The 8% domestic tax reduction will especially help the domestic corporations that have been using American employees to produce goods and / or provide services here in America. The US foreign tax on American corporations will be 20% and as you may know, this is reduced to simplify the tax code and eliminate the foreign tax credits that have been abused over the years. The higher rate (20% v 8%) is meant to incent companies to come back. An eight percent domestic tax rate v 20 or 35% may induce some offshore-centric companies to come home, but it is highly probable that this will not be enough to have all fall in line.
Another big goodie on the carrot side for firms or portions of firms operating in the United States will include direct expensing of all costs. No depreciation schedules will be necessary. For firms manufacturing overseas, the schedules will continue to be used. This is another way to encourage US plant expansion and we hope this too will be a carrot to help bring businesses back.
Of course, no corporation should receive subsidies for anything. No corporation should receive anything any other company cannot get. All corporations will therefore play by the same rules. Those that operate their businesses in the US will receive major benefits, and those operating overseas will not receive as many benefits.
Another important RRR incentive, Reduce Regulations will eliminate business stifling rules and this will assure that no company ever gets punished by the government for setting up shop in America. This will surely help bring jobs back. If we don’t get them on the carrot, however, the new America will get them back to America on the stick. It will become more expensive for American firms that use employees offshore – whether the industry is service or manufacturing.
Yes, the sticks are big. The objective of the goodies, such as tax cuts is not to be nice to corporations. It is to bring America back to being a country that can support a prosperous middle class. In the RRR plan, the notion of Reindustrializing America is intended to bring back industries and plenty of plant jobs, engineering and IT jobs, as well as other good jobs. They will come back home because the carrots and sticks in RRR style Mercantilism will assure companies that it is their best option.
RRR Mercantilism will provide the incentive for formerly all-American corporations that have strayed to other countries to for profits, to change their ways and think America-first. Historian Newt Gingrich would agree that this is the first time in world history that tariff protectionism needed to be invoked to help the people rather than the domestic businesses. The secret objective of RRR Mercantilism thus is to protect Americans from American corporations that have taken jobs offshore. The mantra of RRR Mercantilism is that you are not an American Corporation if you have moved your American jobs overseas.
Since American companies may not be motivated to return jobs to our country, RRR Mercantilism encourages foreign companies to build plants and offices right here in America, where they can then hire American employees. It is that simple. For those “faux American” companies that choose to make their products offshore, Americans will benefit from a higher foreign corporate tax rate and from a tariff on the goods imported to the US from the country of manufacture.
So, one stick is that the tax rate on dollars earned by US corporations overseas, which includes any products shipped to the US or anywhere else, is not the low 8% domestic corporate tax rate. Instead it is a 20% straight tax over and above whatever tax is due to the foreign country. The foreign and domestic tax rates have been 35% for years but corporations have been able to deduct the foreign taxes paid to the host country in calculating their bill. In this plan, since the rate is lower to accommodate the foreign tax, there is no deduction for the foreign tax.
In the unlikely event that American corporations choose to revolt and decide to unregister their corporate charter in the US, I would suggest that perhaps a third tier of income tax and an even higher tariff than those that simply grin and bear it might be imposed In other words, their tax situation will not improve. The government of this United Sates under the RRR plan will be charged with publishing the names of “faux American” corporations that have abandoned their American Corporate Charter for the sake of higher profits. Perhaps with a loyal American population, no additional fees would need to be extracted as Americans may be upset enough to simply boycott their products.
Therefore, any “faux American” business that chooses to revolt against Americans, may find things getting worse for their company if they choose to continue to do business in America. Remember the RRR mantra implicitly is America for Americans. It is America first and all other countries second. Government, corporations and unions come far later in the pecking order, well after individual Americans. I would recommend that the names of any newly unregistered corporation be placed on a large placard outside the Department of Commerce Building in Washington DC for all Americans to see. It is time to bring back public shame.
A similar notion can be developed for services, such as offshored call center work, and any other service is moved from our shores to other shores. The objective of RRR Mercantilism is to create prosperity in America by helping the American people be prosperous by having better work opportunities. If corporations, American or otherwise choose to play ball with US, they should be very successful because of RRR Mercantilism while American employees regain their prominence in the world.
One more stick, upon which we have lightly touched, is tariffs. All of these moves, from restructuring the tax code, reducing offshoring, reducing regulations, and raising tariffs are all designed to help reindustrialize America using the basic principles of Mercantilism. This means we adopt principles that bring back higher paying jobs for Americans – especially our forgotten college graduates.
To do this right, tariffs will again be in play. I am not sure what the right tariff is but I would expect there to be at least a 20% tariff on American goods imported into the US from American corporations as well as imports from foreign corporations. We can also figure out how to make this work for outsourced services. While corporations plan to outsource us all to other countries, since the people control the government, it is up to US to assure that it costs any company that executes a perdition strategy on America, to find out first hand that such a strategy is not good for the sponsoring corporation.
To make it fair, I would also suggest a fair tariff on foreign goods from China and other countries, without exception, to give our loyal domestic producers protection from foreign businesses. In one set of calculations that I performed, after a phased in approach, the RRR package would add as much as $500 billion to the treasury per year, while more importantly staging the US for reindustrialization and much better jobs for all of our citizens.
We must remember that the American market represents ¼ of the world’s market. Once a company is here, ¼ of the world’s buyers are at its disposal. Companies can do quite well concentrating on America first and treating Americans fairly. No company that is in its right mind; would not want to participate in the American marketplace.
In the last thirty years and more obviously, in the last ten years, American companies have forgotten their loyal American employees and they have chosen higher profit opportunities elsewhere. The new tax code and the tariffs, discussed in future installments of the RRR as it is revealed, is intended to bring a lot of industry back to the US along with lots of the best American jobs that many believed never would return.
If American based corporations choose not to come back at an acceptable level, they will miss out on an opportunity to participate in the best business climate in the world. Their places at the table will quickly be filled with foreign enterprises that will make up the shortfall and give Americans the job opportunities they have been denied by “faux American” corporations. Foreign corporations have proven they can be a blessing as we have seen in recent years with the auto industry. A good look at these foreign companies over these years and even the prudent conservative would conclude they have done more for Americans than the “faux corporations” that have left, lock, stock, and barrel, with misery in their wake.
In my humble opinion, a foreign based company that sets up shop in America and hires Americans at a decent wage is a more American business than a so-called American Corporation that hires foreigners in foreign countries to make products and then it ships them back here duty free. RRR Mercantilism says the duty free days are gone. If you want to be treated as an American, be good to America.
There are a number of other notions that go along with reducing taxes in a really fair way. The RRR plan accommodates all and delivers insights powerful enough to help us know that all facets need to be revamped to be fair. This includes the personal income tax structure the possibility of a Fair Tax, repercussions from a zero to humungous capital gains tax, and of course the other precepts of an honest and fair corporate tax, which includes solving the foreign income and tax deferral problem. All of these income / taxation notions and dilemmas are examined in this series. I bet you can’t wait until the next installment.
Brian Kelly owns his own IT business consulting practice and is a retired Assistant Professor of Business Information Technology at Marywood University; he is married and resides with his wife of thirty-five years in Northeastern Pennsylvania. Kelly believes that limited government spawns both liberty and freedom, and is running for Senate in Pennsylvania where he has been endorsed by the Independence Hall TEA Party.
About Brian Kelly
Brian Kelly is a business owner and former assistant professor at Marywood University; he and his wife, Pat live in Northeastern Pennsylvania. Kelly ran for COngress and for the US Senate in his state and he believes limited government brings liberty and freedom. Brian's 48th book is titled, Saving America, The How-To Book. It is available at www.checkoutking.com and www.itjungle.com.