What’s Wrong With the American Tax and Trade Ideas

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Tax and trade are two of the largest economic debates within the country. They have been viewed of quite some time as dealing with the largest companies in the U.S.

The leaders of the industries obviously want lower taxes and have stated that if the current tax rate was brought down from 35% to 25% or some similar number, they would be able to bring the overseas money and jobs back into the country to make new factories and create new jobs.

This however, is just an idea. There has been no evidence over the course of the past 20 years that has shown that this would work. In 2004, during the last tax holiday, the repatriated money instead of going into the economy, went to share buybacks.

The debate essentially is between companies that want to pay less but do not want to do what they promise with the money. The odds of them bringing the jobs back from overseas seem slim at best.

Looking at the issue through various lenses, it seems that private and family-owned companies, one can see that those businesses would be the ones that would benefit most.

Regardless of the tax rate, 20% of private companies (that account for most of the employment and corporate revenues) invested more than twice as much in productive capital expenditure as public ones, not regarding the tax rate.


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Those same companies were also more likely to get in on investment opportunities than public companies would. Given that the behavior of large public companies is based on Wall Street, it does not seem likely that they would use the extra money to do good for the country. Rather, the money would simply be reinvested into growing the company rather than bringing jobs back or any of the other false promises.

With hopes of a tax plan being settled soon, it will be interesting to see where it leads the economy.

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