Friday, March 26, 2004

Two Cheers for Kerry: That vacation did him some good. He's returned to propose a cut in corporate tax rates and a tightening of tax loopholes. Of course, he makes "keeping jobs from going overseas" the major premise of his proposal, which is popular but unsound. A small cut in corporate tax does not close the wage gap between America and, say, India. And the mainly bogus "tax loophole" talk really does nothing to domestic employment. If Kerry really wanted to be results-oriented, he would cut corporate taxes (which fall disproportionately on poor Americans, in the form of higher prices) and tie the revenue loss to anti-market subsidies, which distort the economy a lot more than allowing companies to defer taxes on foreign profit until realized domestically.

Still, a tax cut is a tax cut, and I never met one I didn't like. This is the first winning issue Kerry has come up with. Bush will be forced to respond beyond this anemic soundbite:

"John Kerry's plan to reshuffle the corporate tax code does nothing to help America's small businesses and entrepreneurs be more competitive," Bush spokesman Steve Schmidt said.
Neither did tariffs, you idiot.

Another word about the "offshoring" context that Kerry is using for this proposal. By all accounts, Kerry's no moron. He certainly understands that 99.99999% of practicing economists consider it a non-issue. Beyond that, his own economic advisors have no doubt told him that this will do little to create more domestic jobs, except as a function of an expanding economy. Given that an already expanding economy is using productivity gains to surge at significant rate without coincident employment growth, isn't it possible, even likely, that the net effect of this will be negligible on the job market? I suppose that's what makes it such a winning issue. It does something right for the wrong (but popular) reasons, even if the biggest effect is minor and unrelated to what Kerry says will be the effect.

More: Julian Sanchez says,

Kerry's plan to encourage companies to do business in the U.S. apparently includes a reduction in the corporate tax rate. Maybe there is a silver lining to this "exporting America" bollocks.

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