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.

From USA TODAY, “$5,000 tax credit for each new job a big part of Obama’s plan,” reporting on the President’s State of the Union reaffirmation of a campaign pledge, “I’m also proposing a new small business tax credit — one that will go to over one million small businesses who hire new workers or raise wages.”

There’s only one problem: Business groups say the credit won’t do much to boost hiring.

“I really don’t think it’s going to be much of an incentive,” says Bill Rys, tax counsel for the National Federation of Independent Business. “Mostly it is going to be used by businesses that would have been hiring anyway.”

The National Association of Manufacturers is promoting its own job-creation package, featuring a cut in corporate income tax rates and a more generous tax credit for research and development. The group considers those changes more important than the $5,000 tax credit.

“For those manufacturers who are looking to hire, this will help,” says spokeswoman Erin Streeter. “We don’t anticipate this tax credit being a reason for them to hire. Our members are going to hire if there is a long-term need.”

Erin is referring to the NAM’s new Milken Institute study, “Jobs for America.”

Very few people take the tax credit for hiring seriously as anything other than politics.

From the Tax Foundation, “Which States Are Best for Business? 2010 State Business Tax Climate Index“:

Washington, DC, September 22, 2009 — South Dakota has the most “business-friendly” tax system, and New Jersey has the least, according to the Tax Foundation’s 2010 State Business Tax Climate Index released today. The Index measures the competitiveness of the 50 states’ tax systems and ranks them accordingly based on the taxes that matter most to businesses and business investment: corporate income, individual income, sales, property and unemployment insurance taxes.

The states are scored on these taxes, and the scores are weighted based on the relative importance or impact of the tax to a business. Keeping a state competitive in today’s global marketplace can be difficult, but there is one factor lawmakers have direct control over: the quality of state tax systems. The Index measures how well a state’s tax system encourages investment by maintaining a broad tax base and low rates.

“When policymakers are considering tax changes in their states, they should remember two rules: Taxes matter to business, and states do not enact tax changes - increases or cuts - in a vacuum,” said Kail Padgitt, Ph.D., who authored Tax Foundation Background Paper No. 59, “2010 State Business Tax Climate Index.” The Index represents the tax climate of each state as of July 1, 2009, the first day of the standard 2010 fiscal year, and is available online at http://www.taxfoundation.org/research/show/22658.html.

California is 48, New York is 49. No surprise there.

More from NJBiz.

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.

An editorial in today’s Wall Street Journal builds on the Tax Foundation report we cited yesterday about the effect of a income tax “surtax” to pay for health care. In “The Small Business Surtax,” the Journal notes the fact that the majority small businesses — including manufacturers — file their taxes as individuals, so Rep. Charlie Rangel’s proposed tax increase would hit jobs creators the hardest.

Another implication of the Rangel plan is that America’s successful small businesses would pay higher tax rates than the Fortune 500, and for that matter than most companies around the world. The corporate federal-state tax rate applied to General Electric and Google is about 39% in the U.S., and the business tax rate is about 25% in the OECD countries. So the U.S. would have close to the most punitive taxes on small business income anywhere on the globe…[snip]

A new study by the Kaufman Foundation finds that small business entrepreneurs have led America out of its last seven post-World War II recessions. They also generate about two of every three new jobs during a recovery. The more the Obama Democrats reveal of their policies, the more it’s clear that they prize income redistribution above all else, including job creation and economic growth.

The House Democrats are expected to release their health care legislative package today. Will jobs creation have any place in their plan?

From The Tax Foundation:

Funding for increases in the federal government’s spending on health care continues to be debated in Washington. The newest funding proposal floated by the House Ways and Means Committee is a surtax levied on married tax returns with adjusted gross incomes (AGI) over $250,000 and single returns earning above $200,000. While there is speculation as to what the actual surtax rate will be, the 4 percent figure seems to be the focal point.

A 4-percent federal surtax along with recent increases targeted at high-income taxpayers at the state level has led to concern over how high the top tax rates would be in each state, especially large states with very high top marginal tax rates like California and New York. Some researchers merely sum the rates at the federal, state and local level to give a statutory total tax rate. A more accurate method is to calculate the effective marginal tax rate. The effective marginal tax rate takes into consideration deductions and exclusions in order to present a truer measure of an individual’s rate. Technically, it is the change in tax liability for a $1 increase in income.

The entry has a full, state-by-state chart, but we’ll lead with the top five:

Top Effective Marginal Rates under a 4-Percent Health Care Surtax by State

Now there’s a list of economically vital states, eh?

And news coverage…

• The Hill, Senate Dems cool to House tax on rich
• Washington Post, “HEALTH-CARE BILL
• Austin American-Statesman, Tax surcharges on wealthy considered for health financing
• New York Times, The Caucus Blog, “House Democrats Plan to Tax the Wealthy to Pay for Health Care Reform

A clear, two-minute video explaining how the Obama Administration’s plans to rework corporate tax deferral rules will make U.S. businesses less competitive overseas and hurt jobs creation here in the United States.

From the Tax Foundation.

The Tax Foundation and CompeteUSA have announced the winners of their video competition designed to inform people about the high U.S. business tax rate and how those taxes harm our competitiveness, wages, and living standards. And the winner is Andrew Patterson of Edmond, Oklahoma:

In “Tax Attack,” Patterson highlights that businesses make everyday decisions based on corporate tax systems and that our high business taxes are making American corporations look internationally for their offices, banking, labor and operations. Patterson, who lives in Edmond, Oklahoma, is a business owner himself, providing film and postproduction services to companies including retailers, business firms, nonprofit organizations and natural gas companies. 

Congrats! A timely competition, indeed.

(Hat tip: John J. Miller)

An editorial in the Sunday Examiner, “High Corporate Taxes Hurt the Real Economy“:

As the current economic crisis runs its course, lawmakers must figure out how to help this nation’s “real economy” of goods and services regain its accustomed place as the strongest in the world. By far the best and the easiest place to start is by reforming America’s corporate tax structure to catch up with Europe and Asia. Step one is a lower corporate income tax. No better way exists to immediately improve the competitiveness of American companies, to repatriate jobs from abroad back to the United States, and to revitalize the whole economy.

Recent, relevant analysis from the Tax Foundation, “U.S. Corporate Taxes Now 50 Percent Higher than OECD Average“:

Amid rising concerns about the state of the U.S. economy, new data compiled by economists at the OECD shows that for the 17th consecutive year the average rate of corporate taxes in non-U.S. countries fell while the U.S. corporate tax rate stayed the same. As a result, the overall U.S. corporate tax rate is now 50 percent higher than the OECD average.Combined with another new OECD study that calls the corporate income tax the most harmful type of tax for economic growth, the implications for U.S. policy are clear. The long-term prospects of the U.S. economy are at risk as long as our corporate tax rate remains out of step with the rest of the world.

The U.S. continues to have the second-highest combined federal-state corporate tax rate among industrialized countries at 39.3 percent. Only Japan has a higher overall corporate tax rate at 39.5 percent. By contrast, the average corporate tax rate among OECD countries has fallen a full percentage point in the past year, from 27.6 percent to 26.6 percent. Ireland’s 12.5 percent corporate tax rate remains the lowest among OECD nations.

To be fair, Sweden isn’t quite the cliched Socialist Paradise/Pandaemonium that used to be held up to the United States as the ultimate comparison for where big government takes you, but still…

From Agence France Presse:

Sept. 8, 2008 — Sweden on Sept. 8 announced plans to cut the corporate tax rate from 28% to 26.3% in 2009 in a bid to improve the business climate. The move is part of a 16-billion-kronor (US$2.4 billion) package the government will formally present in its budget bill to parliament later this month.

Reducing the corporate tax rate will cost around 7.0 billion kronor.

The government said it would also reduce social contribution fees paid by employers by around one percentage point, a move that will cost another 7.5 billion kronor.

“The tax proposals strengthen the incentive for investment and new hires, while simplified regulations reduce companies’ administrative burdens,” the government said.

A good test for candidates’ tax plans. Do their tax proposals “strengthen the incentive for investment and new hires,” and do their “simplified regulations reduce companies’ administrative burdens?”

And let’s check with the Tax Foundation again, see what’s new.

Washington, DC, August 29, 2008 - A recent study shows that while America has left the major features of its business tax system unchanged over the past fifteen years, virtually all developed nations have lowered their corporate tax rates, potentially hurting the competitiveness of the United States.

In Tax Foundation Fiscal Fact No. 143, “Comparing International Corporate Tax Rates: U.S. Corporate Tax Rate Increasingly Out of Line by Various Measures,” Tax Foundation Vice President for Economic Policy Robert Carroll, Ph.D., uses various methods to compare U.S. corporate tax rates with member nations of the Organization of Economic Cooperation and Development (OECD) and the G-7 countries.

“The U.S.’s combined federal-state statutory corporate tax rate (39.3%) is now well above the weighted average for both the member nations of the OECD (31.9%) and the larger G-7 countries (33.8%),” says Carroll. “Moreover, both groups of countries continue to lower their tax rates. Since the early 1980s, the weighted average corporate tax rate has fallen by 38 percent for OECD nations and 37 percent for the G-7 countries, not counting the U.S.”