The following ran in the Feb. 22, 2012, edition of the Dallas Morning News. Economist Bernard Weinstein provided expertise for this story.
February 29, 2012
By Jim Landers
Bernard Weinstein, an economist at the SMU Cox School of Business, offered his thoughts Wednesday on the Obama administration’s proposals for changing the corporate tax code.
What do you think of President Obama’s proposal?
It’s obviously a political document. I doubt very much there would be any serious consideration of the legislation before the election. Obama is trying to curry favor with the business community. He wants to be perceived as pro-business, because he’s sometimes cast as anti-business. One way to do that is to say, “We’re going to cut the effective corporate tax rate, and we’ll be able to afford it by cutting loopholes.”
What’s your view on the 25 percent tax rate proposed for domestic manufacturers?
I don’t believe that corporate investment is being restrained as a result of excessive tax burdens. At the same time, American manufacturing has never been more productive. It’s absolutely astounding. Go back to 1950 — the real manufacturing output per worker was about $40,000 annually. By 2011, it was up to $150,000. That is an incredible pace of productivity gain. So I think it’s hard to argue tax policy has somehow eroded the competitiveness of U.S. manufacturing.
Would lower corporate tax rates make us more competitive with other countries that have lower rates?
U.S. exports have been rising dramatically, even during the recession and sluggish recovery. … So we’re doing OK. That’s not to say we couldn’t be doing better. But it’s hard to make the case that U.S. manufacturers are somehow competitively disadvantaged because other countries have nominally lower tax rates.
I spent a lot of years studying corporate relocation. Taxes are a factor, but they’re not the primary cost. Labor productivity is always the No. 1 factor. And taxes are generally pretty far down the list, maybe fifth or sixth. If you’re making something very standardized, and in Ireland they only have a corporate tax of 12.5 percent and we tax at a higher rate, then sure, the company may go to Ireland. OK. But look where Ireland is today.
Have you heard anyone during the Republican campaign suggest a necessary and serious corporate tax reform proposal?
I haven’t heard anything serious in this political season. Issues related to foreign tax credits, foreign income, those are serious, and companies need to deal with them. … In the policy arena, terms like subsidy, tax preference write-off, loopholes and credits, these terms are thrown around as if they’re substitutes for each other. And they’re not.