Corporate taxes and corporate welfare destroy jobs long-term. Governments should lower taxes and stop picking firms to give handouts. This strategy is flawed.
Burger King and Tim Hortons’ proposed merger ignited calls for government to give more welfare funds to business. But Republicans saw the issue to tackle: ineffective corporate tax policies nudging firms to move abroad and causing them to keep much cash outside the USA. Corporate taxes reduce retained earnings that firms need to create jobs. Governments do not create jobs. They should offer the conditions for job creation.
Corporate Taxes and Corporate Welfare Destroy Jobs
Corporate taxes and corporate welfare detract from effective business performance. Long-term they destroy jobs. Naive politicians want to boycott Burger King. They claim this transaction will shelter income from the USA’s corporate taxes. But they haven’t mentioned the oppressively high US corporate tax rate of 35%. It’s hard to imagine the US has one of the highest corporate tax rates in the world.
Burger King’s must look after its shareholders’ interests. And this decision does that—good stewardship. But, liberals will not go for it as they wear anti-business blinkers.
Tax and spend liberal politicians such as president Obama want more job creation and more taxes from firms. But these goals conflict. Sustained job creation won’t happen in today’s conditions. The USA is one of the highest global tax places for business.
The president and other liberals, naïve in business, do not accept that the economy needs robust firms to create long-term jobs. Thus, firms should pay less taxes, not more. Taxing retained profits means fewer funds for investment. Businesses will create fewer jobs. Job creation is a by-product of a strong, growing business. Job creation must never be the goal. The goal must be to produce goods and services using effective value creation platforms with sustainable competitive advantages.
No company can guarantee jobs long-term. The marketplace decides firms that will survive and grow, and those that will fail. And governments’ taxation policies reduce a firm’s ability to grow.
Governments use taxes to fund firms to save jobs. They favor transport, green energy, regions that need employment, and their pet projects. Unsound, dead firms get welfare, fail, and lay off workers. Still, governments continue to add complex tax rules that hurts business and produce poor operating conditions.
Corporate Taxes and Corporate Welfare Do Not Produce Long-Term Jobs
Corporate welfare does not work, period! So, why do it? This approach fits governments’ tax-and-spend philosophy. The people and liberal media love it. And most governments do it with no adverse fall out. Still, evidence shows governments are inept, limited, and lavish. The government operated the only unprofitable Tim Hortons franchises in Canada. How did this happen? They had captive clients! Yes, but they accounted to no one.
Giving welfare benefits to firms as Canada did with its auto industry is myopic. That industry, built on corporate welfare, is failing. The fall will continue without more welfare. Chrysler enjoyed handouts over the years, but failed more than once. Why? Its business was unsound and its labor contracts expensive. Still. Chrysler got welfare.
President Obama, the king of Corporate Welfare, doled out billions of “stimulus funds” to companies during the Great Recession, and they used them for outrageous projects. As expected, the stimulus program wasted of taxes. And let’s not forget the cash for clunkers that failed miserably, too! Yet, Obama continues his tax and spend approach unabated.
Governments’ role is to create level conditions for firms to flourish. Businesses should want to operate in their districts. It is absurd and naïve to think bribing firms with handouts is more than a band-aid. Let’s abolish corporate taxes and corporate welfare and reduce regulations to a minimum. Stop forcing employees to join unions and pay dues. We need right-to-work laws so unions can’t use workers’ earnings for their political purposes and other antics.
Governments’ are inept and ineffective and should not use taxes to pick corporate winners. These often become losers. And it’s our tax dollars they wasted, to boot!
The USA as the epitome of capitalism must simplify its tax code and lower corporate tax rates to create productive jobs over the long term. It’s time the public realize that corporate welfare is a huge drain on society. It does not provide jobs over the long haul.
© 2014, Michel A. Bell
