Bring Jobs Home to America - Presentation 062111 PDF

8/6/2019 Bring Jobs Home to America - Presentation 062111 PDF

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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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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

J

-01

y

-01

-

J

-02

- -

J

-03

- -

J

-04

- -

J

-05

- -

J

-06

- -

J

-07

- -

J

-08

- -

J

-09

- -

J

-10

- -

J

-11

-


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)


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.


Leveling the Playing Field with an 8%

Business Consumption Tax (BCT)


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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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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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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.


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


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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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


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.


14/19

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


Corporate Income Tax: An Inefficient Revenue

Source


15/19

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



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For clarity, the exampleuses a 10-percent BCT.

How a Business Consumption Tax works


17/19

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.


How the Business Consumption Tax works from

an export-import standpoint


18/19

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.




19/19


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.

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Bring Jobs Home to America - Presentation 062111 PDF