Carrier Deal Shows How Tax Cuts Save Jobs

By Daily Editorials

December 7, 2016 5 min read

Pundits of all stripes have different takes on President-elect Donald Trump's maneuver to keep 1,000 Carrier Corp. jobs from going to Mexico.

Pontificators make great arguments for and against the deal, which involved a combination of threats and incentives. The deal offers $7 million in tax incentives for Carrier over 10 years.

Carrier guaranteed the company would keep at least 1,000 jobs in Indiana and invest $16 million more into the operation, which might create more jobs.

Free-market conservatives don't like incentives, and the president-elect's progressive detractors are in newfound agreement with them.

No matter what pundits say, it is a public-relations coup for Trump and an embarrassment for President Barack Obama.

At a question-and-answer forum last summer, an audience member asked Obama about Carrier's plan to move jobs to Mexico and Trump's grand promise to stop jobs from going abroad.

Obama said: "He's going to bring all these jobs back. Well how exactly are you going to do that? What are you going to do? There's no answer to it. He just says 'I'm going to negotiate a better deal.' Well, how, what, how exactly are you going to negotiate that? What magic wand do you have? And usually the answer is, he doesn't have an answer."

Love or hate Trump's Carrier deal, Obama seized on a negotiation Indiana governor and Vice Pesident-elect Mike Pence had started. He closed a deal to save the jobs. To working Americans who fear for their jobs, the deal appears to be a win.

Without regard to the fairness of tax incentives, one lesson is clear from this outcome: High taxes run corporations out of our country. Low taxes can keep them here. That's why Carrier stayed when Trump and Pence lowered the company's tax expense.

The United States has among the highest federal corporate tax rates in the world, at 35 percent. Trump promises to cut it by more than half, to 15 percent. That means Trump's deal with Carrier can be seen as economic triage. It was an emergency move to head off the imminent loss of jobs in a Rust Belt state that helped elect him.

If Trump reduces the tax rate to 15 percent, he will give a massive across-the-board tax cut to corporations. Americans should hope it has the same effect as the special deal with Carrier. We should hope it saves jobs. We should hope it enables corporations to reinvest billions into increasing stateside production. We should hope it increases production enough to pay down the debt.

There can be no question excessive taxation and regulation have forced corporations to move manufacturing and other work abroad. It is the reason so many calls for customer service are answered by employees in foreign countries.

We tax corporations because it seems like a way to fund government without harming the middle class and poor. Corporations, we hear, aren't even human. If they are not human, we can abuse them to the hilt.

Obama said while seeking re-election in 2012: "I don't care how many ways you try to explain it, corporations aren't people. People are people."

Tell that to the humans who make up the Carrier Corp.

Corporations are technically no more than legal constructs. In practice, they are organizations of, by and for humans. A corporation is the person who invented a product, a CEO who oversees production and sales of the product, and hundreds or thousands of employees who help manufacture, sell and distribute the product and often own shares backed by the corporation's success. The product can be a good, service or commodity.

When we tax the corporation, we reduce capital that can pay the people who make up the corporation. We increase the corporation's cost of doing business, and the overhead is passed along in the prices of goods, services and commodities. Like all taxes, corporate taxes are regressive. They roll downhill to employees and consumers.

To tax a corporation is to tax people.

Trump saved Carrier with a deal to reduce the company's taxes, fair or not. He showed the masses how corporate tax relief saves jobs.


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