John Kensinger on Tax Reform
Our government must immediately create an economic environment favorable for business growth and job creation. Taxation of businesses and individuals must be restructured to allow this economic growth to occur.
At 35 percent, the United States has the highest corporate tax rate in the world. Taxes add an increase to the cost of all products produced and sold by America. Countries with lower tax rates can sell their products at a lower price. A lower selling price is a significant advantage domestically, and in a global economy. American made products must have a competitive pricing for our manufacturing industry to survive.
Picture two gas stations side by side. One is selling gasoline for $4.00 per gallon, and the other $1.71. Where would you buy your gasoline? The answer is obvious. This is also the difference in doing business here and in Canada. Our business tax is the highest in the world at 35% while Canada's is 15%. Businesses can keep more of what they earn, and sell their products for less if they operate in Canada. If the first gas station (America) had a business tax of 15%, it could also sell it's (product) gasoline for $1.71. This example illustrates why American companies are leaving our country, and why higher priced American products aren't selling worldwide. Our business tax has priced our products out of global competition, and has forced companies to leave the U.S. in order to stay profitable. It's time to lower our business tax to 15% so we can keep American jobs and companies here in the U.S..
Our 35 percent corporate tax rate is just one obstacle for American made products. Another obstacle is the double taxation of our exports. American products are taxed once here and again when they are received in a foreign country.
In 2002, the United States decided to offset this double taxation by providing a tax credit to companies exporting American made products. That year, the World Trade Organization (WTO), which regulates trade between countries, ruled that the US could not provide tax credits to lower the price of its exports. The WTO ruled against the US because we have an income, and profit based system of taxation instead of a Value Added Tax (VAT) system.
This is important because countries using a VAT system are permitted to credit back corporate taxes on exports, and impose taxes on imports entering their country.
A VAT is a tax on the value added to a product during manufacturing. If a company takes 10 dollars worth of raw materials and produces a finished product worth 15 dollars, the value added is 5 dollars. The company then pays tax on the 5 dollars, or the value added to the 10 dollars worth of raw materials. This system of taxation is what the WTO recognizes.
It is time for America to take action to get our jobs back from foreign competitors. We must either adopt a Value Added Tax System, or reduce the existing corporate tax to compensate for the double taxation of our exports. I favor reducing the corporate tax rate from 35 percent to 15 percent or less. A tax reduction will be more efficient to implement than a complete change of our tax code to VAT.
All Americans deserve a responsible government and a fair personal income tax. Over the last forty years, government spending has increased seven times more than personal income. Discretionary spending by the government and earmarks has doubled over the same time period.
The answer to our national debt crisis isn’t taxing the American people more, but requiring the government to spend less. We need to look at creative ways to consolidate government departments and eliminate waste. Spending increases should be held to the annual rate of inflation.
I would work toward an immediate 5 percent tax cut for all Americans and an eventual transition to a flat 15 percent income tax.
A restructuring of our tax codes will increase our global and domestic competitiveness while putting money back into the hands of the American people.
The Kensinger for Senate Committee is committed to providing our citizens with the economic tools and freedoms necessary to build America’s future. The American people are this nation’s greatest resource. It is the people, not the government, that hold the key to achieving greatness. If you believe in these principles, then we can use your help. Our committee will need volunteers for signature gathering and fund raising so we can bring our message to the American people. To donate, please make your check or money order payable to the: “Kensinger for Senate Committee”:
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