“With fourth-quarter GDP growth estimated at less than 2%, an unemployment rate above 7% for almost five years, and the lowest percentage of Americans employed or looking for work since 1978, America needs lessons from President John F. Kennedy,” Diana Furchtgott-Roth writes for MarketWatch. “Here are six lessons from Kennedy, who was assassinated 50 years ago today.”
Lesson 1: Economic growth creates jobs: Kennedy, dissatisfied with economic growth rates of 2%, wanted four or five percent growth. Speaking on the Indianapolis radio station WTTV on Oct. 4, 1960, he said “In order to maintain full employment in the 1960s, which, after all, must be the object for all of us, we are going to have to have an economic growth twice what we had last year, about 4.5% per year instead of 2.4%.”
Lesson 2: Lower taxes stimulate economic growth: On Sept. 18, 1963, JFK said, “A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”
Lesson 3: Tax havens attract multinationals: In a message to Congress on taxation on April 20, 1961, he said, “In those countries where income taxes are lower than in the United States, the ability to defer the payment of U.S. tax by retaining income in the subsidiary companies provides a tax advantage for companies operating through overseas subsidiaries that is not available to companies operating solely in the United States. Many American investors properly made use of this deferral in the conduct of their foreign investment.” Today the top American corporate federal tax rate is 35%, compared to the 24% average of the countries in the Organisation of Economic Cooperation and Development.
Lesson 4: High taxes slow capital formation: The disincentive effects of high taxes for investment in plant and equipment was a constant theme in Kennedy’s presidency. Kennedy advocated an investment tax credit to encourage capital formation. Although it would have been more efficient to allow capital to simply be expensed, an investment tax credit is better than nothing.
Lesson 5: High taxes reduce risk-taking: Kennedy wrote in a Jan. 24, 1963, message to Congress, “Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort — thereby aborting our recoveries and stifling our national growth rate.” Entrepreneurs add to the growth of the economy by using their ideas to create new firms, and often new jobs. The success of Apple, Twitter, and Google offers just a few examples of the payoff to new ideas. If Apple co-founder Steve Jobs had simply taken a job with IBM, the development of the computer industry would have been far slower.
Lesson 6: Lower taxes generate more revenue for Uncle Sam Ira Stoll, author of “JFK, Conservative,” told me “Kennedy’s tax cuts were the model for Reagan’s, and they did exactly what Kennedy predicted they would — lead to economic growth so vigorous that federal revenues ended up rising even at the lower tax rates. Kennedy wanted to cut not just the 91% income tax rate to 65%, but also the 25% capital gains rate to 19.5% — lower than the 23.8% top rate now under President Obama.” After the tax cuts, real GDP grew at 5.8% in 1964, 6.5% in 1965, and 6.6% in 1966. The unemployment rate declined from 5.2% in 1964 to 3.8% in 1966, falling all the way to 3.5% in 1969.
Read more in the full article here.
MacDailyNews Take: The U.S. corporate tax rate is way too high. Obviously.
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013
[Thanks to MacDailyNews readers too numerous to mention individually for the heads up.]
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