By Walt Nett
April 24, 2011
I wonder how many folks at the Workforce Solutions South Plains luncheon had the same “A-ha!” moment I had at lunch a couple of weeks ago as Tom Pauken talked about a rather radical revision of the nation’s corporate tax laws, which he points to as a major “job killer.”
Pauken, chairman of the Texas Workforce Commission, is an ardent supporter of what’s known as the Hartman Plan, a proposal put forth by Austin businessman David Hartman that calls for doing away with the nation’s corporate tax rate and the 6.2 percent payroll tax businesses pay on their employees, in favor of a business consumption tax of 8 percent adjusted at the border, so that the 8 percent would be collected from all imported goods and services, and U.S. companies would get an 8 percent tax credit or abatement on exported goods and services.
Do that, and we get back on the track of private-sector job creation. That’s the thing everyone’s been looking for as the clear sign we’re truly coming out of the recession. We’re seeing it in fits and starts, but not enough of it.
Pauken’s view includes a sense of recent history that should shake us up a little bit, even if it only makes us take a different look at an economy that we thought was pretty vibrant prior to 2008.
In terms of job development, it wasn’t. In the first decade of the 21st century, Texas gained more than 640,000 private-sector jobs, but the nation as a while shed more than 3.2 million jobs.
The picture gets even weirder when you isolate on manufacturing.
One-third of the nation’s manufacturing base disappeared between 1999 and 2009. Some firms closed, others moved out of the country. In the end, 5.5 million manufacturing jobs — usually the best-paying skill jobs in a market — were gone. In their place, we were ramping up lower-wage service jobs.
It only took us a decade to forget about a warning the late Sony Corp. head Akio Morita put forth in an essay on “The Japan That Can Say No” – that American business is too focused on mergers and acquisitions, rather than quality goods and a solid manufacturing economy, that we sacrifice long-term economic health with a focus on short-term gains.
So what we need to do is lace up the gloves for a different kind of global trade competition.
Switching from the current corporate tax to the business consumption tax puts us on an equal footing with our global trade competitors. But we need better stuff to get back in the contest, and that means getting out manufacturing jobs back in the states, and doing quality work.
The potential impediment to all this is decades of “cobble-it-together” tradition of lawmaking from the nation’s capital.
To make it work, we pretty much would have to have a lot of faith in the willingness of Congress to rip the present corporate tax structure out by the roots and replace it wholesale, Pauken said.
I’d add that it would take something else in Congress — the guts and gumption to turn away the lobbyists who wander the House and Senate in hopes of gaining for their client some advantage or break in the tax process.
Which takes something else — reminding them that we’re the boss, and that the government is everyone’s public servant.