Congressman Tom McClintock responds to Fair Share

A recent column by Patrick Stelmach, a State Organizer for California Fair Share, advocates closing corporate tax loopholes as a way to avoid "massive, across-the-board budget cuts, known as the sequester" that "will gut the programs we all care about."

           Over the past decade, while inflation and population have grown 39 percent combined and federal revenues have grown 37 percent, federal spending has ballooned 64 percent.  The effect of the sequester is to reduce proposed spending growth by $85 billion out of a $3.6 trillion budget - less than 2.5 percent.  To say this will "gut" critical programs is somewhat hyperbolic.

           Mr. Stelmach accuses me of advocating more corporate tax loopholes.  Nothing could be further from the truth.  For decades I have strongly advocated for a flat tax that does away with loopholes that distort the flow of capital away from its most productive use and that allow politicians to pick winners and losers in the market.  Indeed, the House budgets that I have worked on these past three years call for this reform.

           Where we differ is this: Mr. Stelmach would use the revenues to drive more government spending, while I advocate that they be used to lower the overall tax rates on Americans.  I do so for two reasons.

           First, businesses do not pay business taxes: they merely collect those taxes and pass them on to consumers through higher prices, to employees through lower wages and to investors through lower earnings, mainly on retirement funds.  His policy would actually impose roughly $1 trillion of increased taxes on consumers, employees and retirees over the next decade - about $9,000 per family in lost purchasing power.

           Second, the United States has the highest corporate tax rate in the industrialized world - much higher than the socialist regimes of Europe - and this is one of the principal reasons that jobs are fleeing our shores.  Removing the distortions in our tax code while lowering the overall tax rate is essential to job creation and retention.  Those governments that have done so have been rewarded with explosive economic growth.

           Mr. Stelmach believes that government spending creates jobs, but he fails to understand that government cannot put a dollar into the economy that it first hasn't taken out of the economy.  We see the job that is created when government puts that dollar back in; what we don't see as clearly is the job that is destroyed as government first pulls that dollar out.  We see those lost jobs as chronic unemployment and a stagnating economy.

 This policy might fit the Left's "eat the rich" crusade, but the jobs it destroys are eating the middle class alive.  It sacrifices permanent, upwardly mobile productive sector jobs for make-shift subsidized ones that disappear the moment the money runs out.  

           That is the difference between Apple and Solyndra.  And that's all the difference in the world.

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