On July 16, Treasury Secretary Jack Lew appeared with Jim Cramer from CNBC to discuss ways to get U.S. corporations to bring their manufacturing back to the mainland, and away from offshore production. During his four minute interview, the chief financial officer for the Obama administration focused on subsidizing big business with new tax cut incentives as the primary means to entice companies to turn away from cheap foreign labor, and help rebuild industry within the United States.
Unfortunately for the rest of America, Lew said nothing about ways to help struggling Americans survive under their own enormous tax burdens, which are expected to increase substantially in 2015 after the Obamacare fines (tax) are added to the already dozens of obligations nearly every working American must pay for each year. Additionally, Secretary Lew failed to address the massive loopholes already rampant within the U.S. tax code that allow companies like General Electric to pay $0 taxes in 2010 alone, with over $4 billion being given to them by the government in free tax benefits.
Jim Cramer, CNBC: You say that Congress should enact legislation immediately, and make it retroactive to May 2014, to shutdown the abuse of our tax system.
Jack Lew: We have made it clear for years that we want tax code incentives for investing in the United States and disincentives for taking businesses out of the United States. We should have some economic patriotism here... it's not right to take an American firm and allow them to reap all the benefits of what we do to make it a safe place to do business, and then to say I don't want to pay taxes here and shift my corporate address overseas to pay a lower tax rate, or no taxes.
The best way to deal with this is through comprehensive tax reform. - CNBC
Secretary Lew is correct in his belief that the U.S. places an unfair burden on American companies since our corporate tax rate is one of the highest in the developed world. And in a purely capitalistic society, and a now global economic paradigm, it is only right for corporations to find the cheapest ways to run their companies and to make profits, since the laws are based on fiduciary responsibility to shareholders and not a moralistic one to society.
However, we live in a time when American GDP is no longer tied primarily to industry, manufacturing, and production, but on consumer and government spending. And since consumer spending alone makes up 60-70% of the nation's annual economic output, it is much more logical to focus on how the government can put more money into the hands of the people to stimulate and grow the economy, rather than on providing corporations additional tax breaks so they can use the money for stock buybacks, and not job creation, which has been in decline since 2007.
According to a list of direct and indirect taxes Americans pay each year to municipal and federal revenue collectors, the public individually pays out of pocket on 97 different tax items, with income taxes alone calling for 30% of their earnings. Added up, some Americans may be paying as much as 60% of what they earn to the government, leaving a net return barely enough to cover basic necessities.
And of course, this does not include the hidden tax known as inflation, which due to the Federal Reserve's excessive printing of money and vast increase to money supplies, has caused Americans to pay on average 6% more per year for education, food, energy, and health care, leaving very little left for discretionary purchasing and the means to grow the economy via consumer spending.
Corporations already have loopholes, protections, and incentives to remain in the U.S., and help recover and rebuild American industry. Yet because of NAFTA and GATT, two pieces of legislation passed by Congress that Secretary Lew or President Obama refuse to touch, corporations have no incentive at all to bring their businesses back to the U.S., leaving the American people the sole cash cow by which the government can fleece to feed their ever growing bureaucracy and indebted budgets.