Rather than having American goods and services finding their way to foreign markets, U.S. Sen. Mike Lee thinks he has a better way for globalization to help what he calls “the forgotten Americans.”
Speaking recently at a World Trade Center Utah forum, the Utah Republican suggested a two-step reform in federal taxes. The first would eliminate the federal corporate tax entirely — “It is a relic of a bygone era,” Lee said — while the second would raise taxes charged on investment income, such as dividends and capital gains, and treat it as ordinary income.
“The zero corporate rate would turn the bad trade deals that President Trump has decried on their heads and bring more of the global economy here rather than having more of the American economy sent abroad. And the growth spurred by the new investment would be realized, to a very substantial degree, as higher wages,” Lee said.
“This would allow us to do something that I suspect many of you would like. Rather than having the sort of protectionist instincts that seem to be taking hold right now translate into a trade policy that could usher in a new trade war, a new war of American protectionism, we can head straight into the wind and come out on top.
“Rather than withdrawing from global trade, we should be looking for ways to benefit from it, and this would allow us to do exactly that. Free trade would no longer be a mixed blessing for American workers. It would deliver economic protection without the protectionism and without the harm that results from it.”
Lee said that globalization “is a phenomenon that extends the benefits of capitalism beyond national borders” but also has moved investment that used to flow almost entirely to places like Michigan, Ohio or Utah instead into China, India and Indonesia.
Global capitalism today “increasingly brings together rich people from rich countries and not-rich people from not-rich countries. This has made people in both of those groups richer and more prosperous and more upwardly mobile than ever before. … We also have to acknowledge though that this sometimes leads not-rich workers who happen to live in rich countries out of the bargain, and this especially ends up affecting the American middle class.”
American workers, he said, end up being paid less because of the corporate tax. Some economists estimate that perhaps half of federal corporate taxes come out of worker wages. Eliminating the federal corporate tax would return that share back to workers and would result in American investors looking to the U.S. rather than the other side of the world, he said.
The tax elimination would tilt the global economy in favor of the U.S., he said.
“Rather than compete against foreign tax havens, the United States would become the world’s new tax haven,” Lee said. “For foreign investors, this tax reform would be an offer they couldn’t refuse. And even for American investors, the framework would offer a better deal than they could get anywhere else. … Under the plan that I’m describing, American investors could still come out ahead, so long as they invest in the United States.”
Trillions of dollars in foreign and domestic investment would flow through the American economy, he stressed.
“With the corporate share, the corporate rate, liberated by this zero rate, a greater portion of all this new investment and growth would be channeled straight into the paychecks of American workers. Overnight, the fastest and easiest way for global investors to make money would be to create productive, sustainable middle-class jobs and to do so right here in the United States,” Lee said.
While the World Trade Center Utah has pushed for increased direct foreign investment, it also has been seeking more avenues for Utah companies to sell goods and services abroad. Utah’s exports totaled about $12.1 billion in 2016.
“We want Utah companies to compete globally,” said Derek B. Miller, World Trade Center Utah’s president and chief executive officer. “We want Utah companies to compete, to succeed and to win globally. For us, it’s all about increasing more Utah goods and more Utah services going out to the world where, by the way, 95 percent of the customers in the world live — outside of the borders of the United States. You’d be foolish not to focus on them.”
Miller likened the situation to a person taking advantage of an entire stadium when selling hot dogs at a football game. “Why on Earth,” he asked, “would you limit yourself to Row 5 of Section BB?”
