John Engler, president of the National Association of Manufacturers, was interviewed by WJR’s Frank Beckman earlier this week, leading up to Engler’s appearances with former Gov. Jim Blanchard to help raise funds for the Michigan Political Leadership Forum.

The interview opens with the expected jousting and joshing on Michigan and Washington politics, but then Frank turns the discussion to the Milken Institute report, “Jobs for America.” Engler observes:

The big 10,000 foot view is that this nation needs to have a growth strategy, and with a growth strategy you end up getting jobs in the private sector. We don’t think there’s such a strategy in place at the moment, and it’s important to recognize that just like the states compete vigorously against each other, nations are now competing against each other.

Our nation really has opted out. It’s sort of like going to the Olympics and not training and hoping that somehow you’re going to win a medal. Not going to happen.

We think you’ve got to get very aggressive. When we look at the competitive environment in the world, you cannot send Michigan or Ohio or even North Carolina or Mississippi out to compete against Singapore or China or Ireland with some of the things that they’re doing to attract business and investment.

I tell people, Frank, that you want the United States to be the best place in the world to locate a company, to headquarter it. You want it to be the best place in the world to do the bulk of your research and development, and them finally, you want it to be a great place to do a lot of manufacturing, and especially to meet the needs of the North American market.

That’s when you get to the idea that taxes matter, regulations matter, the right kind of education or workforce training - all of that matters. Frankly, we’ve got so much room for improvement, and the conversation in Washington is creating lots of risks, lots of doubts, and solving no problems.

Engler and Beckman also discuss health care policy. The full interview is available as a podcast, “Frank talks with Gov. John Engler, who will be in town for the Michigan Political Leadership program at MSU.”

From the Heritage Foundation’s budget expert, Brian Riedl, an analysis of President Obama’s FY2011 budget, “Obama’s Budget Seeks $2 Trillion More in Spending and Deficits Than Last Year.” Riedl highlights the unprecedented deficit spending, but in discussing economic growth, the immediate concern should be the tax increases.

President Obama bases nearly all of his (modest) deficit reduction on tax increases. Although no economic theory justifies raising taxes during a recession, he would impose nearly $1 trillion in tax hikes for 3.2 million upper-income families and small businesses. He would eliminate tax breaks for charitable giving and the mortgage interest deduction for millions of Americans.

President Obama has endorsed a cap-and-trade bill that would cost more than $800 billion over the next decade. He has also endorsed substantial tax hikes to finance health care reform. All told, tax increases would exceed $2 trillion, yet they are still not enough to prevent a $1 trillion annual deficit by 2020.

In imposing these new taxes, the Obama Administration would damage the global competitiveness of U.S. manufacturers and other businesses.  A report by the Tax Foundation documents that U.S. competitors are going in the opposition direction, reducing corporate taxes to promote growth, “OECD Nations Continue Cutting Corporate Tax Rates While U.S. Stands Still (Federal Plus Provincial/State Corporate Tax Rates for OECD Countries, 2008-2009).”

Less competitive = fewer sales = stagnation = fewer employees. So much for JOBS!

The recent analysis by the Milken Institute, “Jobs for America,” concludes that reducing the U.S. corporate income tax rate to match the OECD average would trigger new growth. By 2019, it could boost real GDP by $375.5 billion (2.2 percent), create an additional 350,000 manufacturing jobs, and increase total employment by 2.13 million.

The National Association of Manufacturers today released a major economic analysis documenting the impact on the economy and jobs creation of several policy changes. The report was conducted by the Milken Institute, a nonpartisan and independent think tank in Santa Monica, that used respected and rigorous economic models to assess the impact of proposals.

The report is “Jobs for America,” and the Milken Institute has put up a website with the full study, explanatory slides, and other material: http://www.milkeninstitute.org/jobsforamerica/

“Jobs for America” concludes that proposed corporate tax cuts, export control reforms and key infrastructure investments could create more than 11 million jobs in the U.S. by 2019.

Specifically:

• Reducing the U.S. corporate income tax to match the average of other industrial countries (OECD nations) would boost total employment by 2.1 million jobs.
• A permanent R&D tax credit, increased by 25 percent, could generate 510,000 jobs within a decade.
• Modernizing U.S. export controls would expand exports in high-value areas, increasing total employment by 340,000.
• Investing $425.6 billion across 10 infrastructure categories (including highway and transit, energy efficiency, wastewater treatment, Smart Grid, nuclear, etc.) would generate 10.7 million jobs over three years.

“Jobs for America” provides the substantive economic analysis that should guide policymakers with a clear course of action if, as many assert, jobs is the No. 1 facing the country.

See also NAM release, “New Study Gives Roadmap for U.S. Job Creation and Long-Term Growth”

From The Tax Foundation, “As Industrialized Countries Cut Corporate Taxes, U.S. Rate Still Second-Highest“:

Washington, DC - Canada, the Czech Republic, Korea, and Sweden all cut their corporate tax rates in 2009, distancing the United States even further from the pack with its combined federal and state rate of 39.1 percent—second only to Japan for the highest corporate tax rate among nations in the Organization for Economic Cooperation and Development (OECD). A Tax Foundation analysis of new OECD data finds that 2009 marks the 12th consecutive year in which the U.S. corporate tax rate is higher than the average rate among non-U.S. OECD nations—and roughly 50 percent higher than that of a mid-ranked country such as Sweden.

“America’s high corporate tax rate should be a red flag to U.S. lawmakers worried about the country’s flagging economic growth, slow wage growth, and our overall global competitiveness,” write Tax Foundation President Scott Hodge and Summer Fellow André Dammert, who authored Tax Foundation Fiscal Fact No. 184, ” U.S. Lags While Competitors Accelerate Corporate Income Tax Reform.” The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/24973.html.

CNBC host and analyst and all-around smart guy Larry Kudlow comments on the inclusion of pro-growth tax relief in the Obama stimulus plan, “Team Obama Adds Business Tax Cuts.” He’s positive, but says more can be done:

However, as yet there is no Obama signal for the most powerful tax incentives that would slash the 35 percent top corporate rate to something around 20 percent. This should apply both to large C-corps and small-business S-corps. It would attract investment, improve future job creation, and relieve consumers who really shoulder the corporate tax costs. Additionally, full cash expensing for business investment write-offs would provide an even greater bang for the buck.

So while the new tax-refund plan and faster depreciation are positives, they are still much weaker than a full-bore supply-side tax-rate reduction that could even morph into full-fledged corporate tax reform. Now we wait for a Republican response, which hopefully will be bold corporate tax reform as well as reduced individual tax rates (at least for the middle class).

Mark Steyn notes the column by Steve Forbes urging President-elect Obama to stimulate economic growth by emulating Ireland’s corporate tax rates and adds:

To a certain type of simple-minded populist, the idea of soaking vast faceless corporations is appealing. But in the end a “corporation” cannot pay tax: The Globocorp corporate HQ looming in chrome and steel over the skyline does not have a pocket to dip into. Like all taxes, the actual cash has to be ponied up by flesh-and-blood human beings - the owners, workers and employees of the corporation. The growing gap between US corporate rates and other developed nations is a massive disincentivization for real human beings to start and grow a business here. And for those already here it encourages the kind of short-term thinking that leads to Bailoutistan and American sclerosis.

From Der Spiegel, reporting on German Chancellor Angela Merkel’s official address for the New Year:

Chancellor Angela Merkel signalled on Wednesday that she may have dropped her opposition to cutting taxes ahead of a meeting on Monday to discuss a fresh economic stimulus package.

 

She gave a vague pledge to cut taxes in her New Year address due to be broadcast on TV later on Wednesday, saying: “Wherever it is justifiable with a view to the next generation, we will ease the burden on all who pay taxes and contributions.”

 

The remark suggests that she is prepared to make concessions to the Christian Social Union, the Bavarian sister party to her conservative Christian Democrats. The CSU has been calling for tax cuts to help avert recession.

Also, from Singapore, “Prime Minister Lee Hsien Loong’s New Year’s Day Message“:

8. Apart from these two measures, we also lowered corporate taxes in 2008. New enterprises and smaller companies enjoy further tax exemptions, which mean that many pay little or no taxes. For households, the 2008 Budget package included Growth Dividends, U-SAVE, S&CC and Rental Rebates, and top-ups to Post-Secondary Education Accounts. These schemes are helping Singaporeans, particularly lower income families, to tide over the difficult period.

From an editorial, Investor’s Business Daily, “Memo To Obama: Cut Taxes For All“:

If Obama is serious about getting the economy going again, he could do a number of things — and right away, not years from now, as with the $675 billion to $775 billion he plans to spend on infrastructure and imaginary “green jobs.” These steps would include:

• Cutting corporate tax rates. U.S. businesses pay a top rate of 35% on income. That rises to 40% when you add in state taxes. In Europe, the average corporate tax in 2007 was 24.2%, according to the international consultancy KPMG.

Is it any wonder some of our most successful corporations move offshore? Cutting corporate taxes even to 25% would improve investment returns — and lead to more jobs and output.

Want to spur investment? Cut capital gains rates, too.

The AP covered the news conference this morning at the NAM on the new cost study, and the story gets right to the point. From “Global gap on costs narrows for US manufacturers“:

WASHINGTON (AP) — Costs that hamper the competitiveness of U.S. manufacturers have fallen in recent years compared with those of foreign producers, but high corporate taxes and other expenses still put domestic products at a distinct disadvantage in global markets, an industry group said Thursday.

The National Association of Manufacturers reported that structural costs, which include expenses such as health care, taxes and expenditures on environmental issues, have fallen since 2003 relative to the United States’ nine largest trading partners.

U.S. manufacturers now face a 17.6 percent disadvantage because of the structural costs, down from 22.4 percent in 2003, and 31.7 percent in 2006, according to the study comparing the U.S. with Canada, Japan, Germany, Korea and the United Kingdom.

NAM news release on the study is available here.

And the full 2008 cost study, “The Tide Is Turning: An Update on Structural Cost Pressures Facing U.S. Manufacturers,” is available at: www.nam.org/coststudy.

UPDATE Reuters, “High US corporate tax hurting manufacturer competiveness.”

An editorial in the Wall Street Journal, “The Stockholm Curve“:

With the economy struggling, at least some people are urging a pro-growth tax cut. Too bad they live in Stockholm. As a recent headline in Agence France-Presse put it: “Sweden Announces Income Tax Cuts to Boost Jobs.” The government is planning to cut business taxes and the personal income and payroll tax.

“The corporate tax is one of the taxes which large companies really study when they plan to set up business somewhere,” says Jan Björklund, leader of the country’s Liberal Party, in promoting the tax cut plan. The corporate tax reduction will bring the Swedish rate down to 26.3% from 28%, continuing its fall from a high of 57% in 1987. This means that Swedes will soon have a corporate tax rate one-third lower than the U.S. average of 39.5% (the 35% federal rate plus the state average).

Sens. Obama and McCain discussed corporate taxation in the presidential debate in Oxford. (Transcript)

McCain:

Right now, the United States of American business pays the second-highest business taxes in the world, 35 percent. Ireland pays 11 percent.

Now, if you’re a business person, and you can locate any place in the world, then, obviously, if you go to the country where it’s 11 percent tax versus 35 percent, you’re going to be able to create jobs, increase your business, make more investment, et cetera.

Obama:

What I do is I close corporate loopholes, stop providing tax cuts to corporations that are shipping jobs overseas so that we’re giving tax breaks to companies that are investing here in the United States. [snip]…

Now, John mentioned the fact that business taxes on paper are high in this country, and he’s absolutely right. Here’s the problem: There are so many loopholes that have been written into the tax code, oftentimes with support of Senator McCain, that we actually see our businesses pay effectively one of the lowest tax rates in the world.

We turn again to the Tax Foundation for analysis and commentary. 

Companies, like lobbyists, are an easy target when it comes to political speeches. “Taxing corporations” unfortunately makes for a good soundbite. But, a good policy maker knows that it’s not that simple. That’s why it was disappointing to hear Senator Obama launch an attack on “big corporations, oil companies…and companies that ship jobs overseas.”

The reality is that these very companies that Obama wants to tax are major contributors to our country’s economic growth. American manufacturers provide well-paying jobs for employees, investment opportunities for shareholders and high-quality products and services for consumers. Today, more than ever, manufacturers compete in a fiercely competitive global marketplace. In recent years, our trading partners have lowered their corporate tax rates making it harder for U.S. based companies to compete. Raising taxes on these companies won’t make them more competitive and it certainly won’t create more jobs. At a time when the economy is struggling to recover - we need policies that help companies expand and grow. Lowering - not raising - the corporate rate would be a good first step.