Corporate taxes can be selectively raised for America's benefit

I was born in 1989 and grew up in a large Irish Catholic family north of St. Paul, Minnesota.  For most of my life, I believed in the antiquated fallacy that America's superiority was irrefutable in terms of economic opportunity and military prowess.

In the college town of Madison, Wisconsin, when I had the chance to study the history of American business, my self-taught indoctrination into American capitalism grew.  I started my career in Chicago.  Then I moved to the mountains and had a couple of babies.  I maintained my belief, with great sincerity, that the United States is the best place for economic upward mobility in the world.  I believed in the middle class.  The little man.  The underdog.

What I didn't realize until I hit 30 was that I am merely a byproduct of the largest middle class the world had ever seen (in that my grandparents and parents were part of that generation) but that I was not a direct participant, for this idyllic middle class is gone.  It's now merely a figment of our collective imagination.

America is now the land of haves and have-nots, no better than the eighteenth-century European caste system we were originally fleeing.  Except, instead of land-owning aristocrats who keep the plebeians in a state of serfdom, our oppressors are ourselves and the sum of our collective daily activity.

The American people are the architects of the demise of their middle class in a single major way: we outsourced makers and now are importing most of our day-to-day products.

From 1946 to 1964, our trade-to-GDP ratio was just under 5%.  In other words, we made our own things.  We made our own cars; we made our own clothes; we relied on family farms to bring quality food to market.  America was a network of small businesses customized to fit the culture, practical needs, and identity of each town on the map.

We also had the highest rates of homeownership in the world.  The wealth created by good manufacturing jobs allowed middle-class families to increase their leisure hours, decrease their working hours, have babies, and take vacations.

Somewhere along the way, industries thought they would take advantage of cheap labor abroad and the favorable exchange rate on the dollar.  From the 1970s to the Great Recession of 2008, we outsourced over 20 million American jobs.

We patronized multi-national firms that had participated in this craze of foreign direct investment while our stateside factories sat vacant, especially those in the inner cities of the Midwest and Northeast.  In 1964, 24% of the workforce was in manufacturing, and now only 8% are employed in this sector [1].

The promise was that international trade was good and that every American would prosper.  What actually happened is that real wealth per household has increased only 13% since 1972, and that's mostly attributed to women entering the workforce [2].  In short, we outsourced millions of jobs and are poorer for it.

Think of all the would-be secondary benefits from making things in America again: commercial construction would continue to be strong; inner-city factories would get a facelift and provide jobs and tax bases for communities most affected by 2020; utilities would see increases in revenue; and restaurants and services supporting these workers would increase in number and prosperity.

It would also mitigate the national risk of another geopolitical event or pandemic interrupting our overly complicated supply chain.  Moreover, we have too much American brainpower allocated to law and financial services.  We should shift our bright minds to making things again.

The most effective way to jumpstart this shift would be for Biden to promote a 40% tax on those corporations that import more than 50% of their products.  Likewise, the government should impose a 40% tax on corporations that have over 1,000 jobs abroad.

Doing so would not be isolationism or nationalism.  Instead, it's common sense and reduces carbon footprints across the board.  Stateside manufacturing will put retailer workers, who currently seem to have lost their jobs forever, back to work.  Germany, Japan, and Italy are all fiercely protective of their textiles and manufacturing, but we refuse to be [3].  It's pitiful and disgusting.

As matters stand, the Biden tax proposal for a flat 28% would be the highest in the Western world, and, if passed, it will see more workers lose their jobs and corporations invest more overseas.  We need to motivate the stateside production and self-sufficiency that has been lost for decades at the expense of the middle class.

Notes

[1] Bureau of Labor and Statistics, U.S. Manufacturing Jobs 1960–Present

[2] Failure to Adjust, How America Got Left Behind in the Global Economy, Edward Alden. 2017. Page 7, IBN: 978-1-4422-7260.

[3] Failure to Adjust, above, at p. 58.

Jess Healy works for a private real estate investment firm in Chicago called Syndicated Equities.

Image: Photo of Jess Healy & family, Los Angles, 2019 by The Alchemist, Lindsey Ross.  Photo of account book by Pixabay.

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