Sweden’s Tax War

Sweden’s Prime Minister Fredrik Reinfeldt announced that the government intends to cut the corporate tax rate, which he called “probably the most damaging tax of all,” down to 22%. That’s welfare-state, high-tax, big-spending Sweden cutting its corporate tax rate to 13 percentage points lower than the U.S. rate of 35%.

I find no reference to [Sweden’s] corporate tax cut being “revenue neutral.” What they sensibly plan to do is actually lower the real tax burden on business, not just shuffle the pieces around. If we are serious about making structural changes in the U.S. that will restore our economic growth and global competitiveness, we have to force our way out of the “revenue neutral” box and talk about real reductions in the tax burden on business.

What government should be asking is: Would we rather have 22% of a thriving, growing business sector, or 35% of a moribund, struggling business sector? The Swedes know the right answer.

If you wanted manufacturing jobs...this would be best way to start such a situation. I don’t see this happening here because too many companies investing into off-shore manufacturing and really don’t want the US to restart the clock on bringing the jobs home. Toss in the added cost of health-care and unions...it probably won’t ever occur. We are anchored down to the Titanic.

Companies don’t “want” to offshore nor are they interested in helping the macro situation of manufacturing in the US.

They want what is most profitable and easy to do.

Increasingly, the US is becoming the low cost producer in the industrialized world. Because real wages have gone down and you can open a factory in a right to work state.

Transportion cost is also on the rise. Shipping a fridge from China is not cheap.

GE is moving much of appliance manufacturing from Mexico and China. Opening new refrigertor and dishwasher capacity in Kentucky. China has high delivery cost and rising real wages. Mexico has such a security problem that providing security to managers,workers,and delivery trucks is making the US look good. Plus you can respond faster to changing market demand if you produce locally.

Look for a lot more manufacutring capacity in the American South over the next decade. Even better if Washington cuts corporate tax rates to be competative. The US will not compete witht the third world with entry level cheap goods. But with mid-end to high-end manufacuted goods that people are willing to pay a premium for “made in the industrialized world” stamp the US will become increasingly competative if we don’t royally screw it up.

The single biggest thing you could do, would be to eliminate the double taxation of corporate dividends. A company has to pay corporate rate on dividends, and then the recipient has to pay taxes on dividend income.

This encourages companies to bloat up, and use spare money on acquisitions to drive up the stock price and create capital gains. Eliminate the dividend tax, and you encourage companies to spin off their divisions, and not undertake acquisitions that make no business sense.

In the short term, one big thing Romney could do to encourage business expansion in 2013, would be to allow equipment purchases to be expensed the same year, instead of being depreciated.

A company has to pay corporate rate on dividends, and then the recipient has to pay taxes on dividend income.

And then a Republican recipient living off dividends from past invested, previously taxed, income gets accused of 'only' paying the second rate and thus being a tax cheat, when the total tax rate on his income is higher than that of 'normal' earned income.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.