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October 27th, 2011 9:57 pm
Re: Businesses Are Scared to Death
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Quin writes below, quite sensibly, that, when it comes to reforming the tax code, changing corporate rates should take precedence over reforming individual rates, reasoning that the economic anemia in private sector business is one of the largest obstacles to renewed growth. I find that analysis completely salutary, although I differ with him on a few particulars in the post.

First, Cain, Perry, and Gingrich all have corporate tax reform as a part of their plans. Cain, of course, would reduce it to 9 percent (although his addition of a federal sales tax would offset some of those savings). Perry would drop it to 20 percent, while Gingrich would take it down to 12.5 percent. As Quin notes, Santorum’s plan is quite good too, although I recoil a little at the fact that he eliminates the tax only for the manufacturing sector. There’s not a particularly good economic rationale for such differential treatment of industries under the tax code (not to mention that it’s a kissing cousin to the “picking winners and losers” criticism that the right has correctly embraced of late — although at least in this case it’s about who gets rewarded the most, not punished).  This leads me to believe that this section of the plan is politically motivated, aimed at boosting Santorum with blue-collar voters of the type that are essential to winning elections in labor-heavy states like his native Pennsylvania.

I’m also not convinced that passing personal income tax reform would be a heavier legislative lift than corporate tax reform, for reasons that Quin lays out. Personal rates are visceral and instantly understandable. Because there are several intellectual steps one has to go through to understand the effect of corporate rates on personal income, I think that may be the harder sell.

These are extraordinarily minor differences in the big picture, however. We all agree on the broad thrust of the argument: without flatter, fairer, more transparent taxes, America will be unnecessarily suppressing the ingenuity that could lead to an economic renaissance. But that change won’t come unless the keys to the White House change hands in January 2013. That’s just one more reason why next year’s election is so vitally important.

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