It’s the military, stupid
The U.S. Chamber of Commerce has published a letter to Congress’s new Joint Select Committee, aka the supercommittee, with the changes they would like to see made to the budget and tax code. The supercommittee’s brief is pretty broad; it will be looking at ways to balance the federal budget by raising taxes and/or reducing expenditures.
The Chamber, which represents business interests, strongly insists that the supercommittee slash entitlements and reform the tax code by lowering tax rates. From the Chamber letter:
The Chamber urges you to consider how the current tax laws act as an impediment to worldwide competitiveness, a deterrent to saving and investment, and an obstacle to innovation and entrepreneurship. Accordingly, the Chamber believes that the current code needs a comprehensive reform to lower overall marginal tax rates, to encourage saving and investment, to foster global competitiveness, increase capital accumulation, attract foreign investment, and drive job creation.
The problem with the Chamber’s argument about lowering tax rates to increase our global competitiveness is that the United States already has some of the lowest corporate tax rates in the western world. Here are corporate taxes as a percentage of GDP from the OECD. (Countries in dark green collect the lowest amount of taxes, countries in red collect the highest) In the Western Hemisphere only South American countries have lower corporate tax rates than the U.S.
Taxes on corporate income as a percentage of country GDP.
The fact is that the U.S. collects a lower amount of total taxes as a percentage of GDP than most of the western world. We are clearly competitive already on the basis of tax rates. Data source: OECD.
Total taxes as a percentage of a country’s GDP
America could be much more competitive, balance the budget and reduce the national debt if we brought our military expenditures in line with our global competitors. This would result in hundreds of billions of dollars in annual savings. For some odd reason the Chamber of Commerce prefers to insist that social entitlements are the sole cause of the federal deficit. Let me just suggest to the Chamber, “It’s the military, stupid.” I’d urge the Chamber to take a more global view based on the data. It might rethink its insistence on lower taxes and slashing entitlements to be globally competitive.
Military spending as a percentage of a country’s GDP
Data source: World Bank.