On June 14, 2012 Consumer Electronics Association CEO Gary Shapiro writes an editorial on Investors.com about how tax policy affects investment in the United States.
“… all of the American business leaders I know would rather keep most, if not all, of their operations in the United States. So why do they shift overseas?
“Sometimes it’s just good business. Being near customers helps sales. As U.S. economic growth has slowed and Asian economies have grown, it makes sense to invest in other, faster-growing markets.
“It is also often cheaper to manufacture abroad. The time, cost and drudgery of foreign trips, and the added expense and delay of overseas shipping, are offset by lower labor and input costs. But cost savings are rarely the only reason.
“A big factor is that U.S. laws encourage overseas investment. The United States taxes overseas income if a company attempts to invest it back in America, so businesses are incentivized to leave their foreign earnings abroad. Every company with overseas revenue faces this perverse incentive.
“In addition, the U.S. not only has the world’s highest corporate tax rate, but it is also one of the few nations to tax the global earnings of multinational companies based here.”
We cannot expect companies to go against their interests and the demands of their investor-owners, but we can set policy such that as companies expand, whether through their U.S. or global operations, we incentivize them with reduced penalties (if any) and through tax policy encourage companies to fully pay out earning dividends to their owners. When new growth is desired and warranted the companies would issue and sell new stock shares to employees and other citizens with the investments occurring right here in the United States or even in other countries. The goal should be to empower ordinary Americans to purchase new productive capital investments supported by financial mechanisms and commercial capital insurance that will secure the pure capital credit loans issued to finance growth. Such investments would, as they do for the wealthy, pay for themselves out of the future earnings (future savings) that the investments generate. The solution is to design financial mechanisms to free economic growth from the slavery of past savings. The result will be both a resurgenance of investment right here in the United States, as well as globally, simultaneously with broadening private, individual ownership of the non-human means of production, which reflects tectonic shifts in the technologies of production.
Until we address the above issues raised by Gary Shapiro and acknowledge that full employment is not an objective of businesses and that companies will strive to keep labor input and other costs at a minimum, even if that means investing in economic growth globally rather than restricted to the United States, we will be stuck in one-factor labor worker economic thinking. Our policies and programs must be designed to break the slow growth syndrome caused by restrictive financing that relies on past savings, and instead finance economic growth out of expected future earnings while generating another source of income for Americans who participate in future ownership.
Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.
This is a third way path to prosperity, opportunity, and economic justice that will result in sustainable economic growth benefiting ALL Americans.
