Santorum gives an excellent defense of his proposed 0% tax on manufacturing

Yes, Rick Santorum is a leader on life and family, but he’s also proposed some great ideas in his economic plan. And his economic plan is very pro-worker and pro-family.

His plan would be a big help to families, as it calls for a tripling of the child exemption. And of course, this gives the Wall Street Journal fits.

Most disappointing is the Pennsylvanian’s proposal to triple the tax credit for children (from $1,000 today), which is a hobby horse of the Christian right. This is social policy masquerading as economics. Unlike a cut in marginal tax rates, a larger tax credit does little for growth because it doesn’t change incentives to save, work or invest. It merely rewards taxpayers who have children over those who don’t.

By the way, the Wall Street Journal got his plan wrong. Santorum is not calling for a tripling of the tax credit (that would be awesome), he’s calling for a triping of the child exemption (still very good.)

We at CatholicVote reject the short-sided Wall Street Journal view of the economy. Like Santorum, we’ve been calling for a more family-friendly tax code for a long time. As we noted on our Facebook wall yesterday, economist Robert Stein has brilliantly dismantled the viewpoint like the one articulated in the recent Wall Street Journal editorial. Here’s Stein:

“…it is time to rethink how the tax code treats ­parents. Too many free-market economists still consider families an afterthought — ­arguing that the tax code should be ‘neutral’ about raising children, as if parenting were merely one hobby among many. But raising children is hardly just another pastime: It is one of the most important services any American can perform for our country.

“Even if we ignore the societal and cultural implications of parenting and consider economic factors alone, no government — especially not a government committed to an entitlement system like ours — can be neutral toward the very existence of future generations of taxpayers.

And that’s why Santorum’s pro-child tax proposal is music to our ears.

But his plan to reduce business taxes down to 0% has conservative economists like Larry Kudlow claiming that Santorum is simply favoring one sector of the economy for another. Over all, he like Santorum’s economic plan, but he called the 0% for manufacturing “terrible.”

“What I don’t like is no corporate tax for manufacturing. If you want to end the corporate tax, end the corporate tax. But he has a 17.5% corporate tax rate — which by the way I like… down from 35%. But when he goes the next step and says manufacturing is tax-exempt…. we shouldn’t be picking winners and losers in government. Why not zero out tech? Why not zero out finance? Why not zero out energy?” Kudlow asks.

And it’s a good point. If we are to favor one segment of our economy then we better have a good rationale for doing so. (Remember: Santorum’s plan would NOT include subsidies, instead it’s a massive tax cut favoring one industry–there’s a difference).

So why favor one sector of the economy? Well, Santorum explains why in this interview with CNN’s Erin Burnett. (Burnett worked at the business channel CNBC for years – so unlike many TV anchors, she actually knows something about the economy.)

Excellent answer. We won’t see retail stores like Wal-Mart leaving the country because of a high-tax rates (their prices will just go up), but a manufacturer might just go to Mexico or China because of our high taxes. In fact, they have for the last few decades. So why not bring them back with an attractive tax rate? Makes a lot of sense. And it’s something that Santorum, having represented blue-collar Pennsylvania is very familiar with.

By the way, those Santorum sweater vests? Made in America, of course.

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9 thoughts on “Santorum gives an excellent defense of his proposed 0% tax on manufacturing

  1. [...] Santorum Defends His Tax Plan Joshua Mercer, Catholic Vote Comments (0) [...]

  2. [...] Santorum: Great Defense of Proposed 0% Tax on Manufacturing – Joshua Mercer, Cth Vote [...]

  3. Leticia Velasquez says:

    I attended my liberal Congressman’s Town Hall in posh Westhampton Long Island years ago to find a roomful of wealthy seniors grousing about their Social Security. I reminded them by killing off 30% of the population the last third century via abortion, and making it prohibitive to raise a family, they were making Social Security insolvent. There are three workers for each retiree, when the system was begun there were 16/1.
    And then their eyes were opened!
    Rick’s got the demographics of the future of America on his mind. Not only are families the basic unit of society, they create the workers to keep the economy humming.
    Go Rick!

  4. tz1 says:

    Translation: we will keep all the cheating and corruption, but cheat in favor of manufacturing and families.

    Robin Hood still violated the commandment. The IRS is a robber, but because it does so by proxh, the church accepts the loot. And we merely discuss who should get robbed and by how much.

  5. Kevin Bensema says:

    I have to agree with Mr. Cudlow. By eliminating taxes for one sector of the economy, you provide that sector with an effective government subsidy. The cost of roads, civil defense, and other government services that benefit the manufacturing sector of the economy – and would be paid for out of tax revenues from that sector – must be borne by the remainder of the tax base. Manufacturing left America more because of cost-of-living differentials with the developing world than higher corporate income taxes. If we leave the market alone and allow free trade, the standard of living in developing countries will rise, some manufacturing will move back here, and the total wealth of the world will increase. Mercantilist policies, on the other hand, will misallocate resources and raise costs at home.

    1. Joshua Mercer says:

      Governments react both to markets and how other governments tax goods, capital and labor. If every country had a low tax on capital gains, but our rate was very high, then free market economists would recommend lowering that rate for the United States to remain competitive in the capital market. (Even if that rate became lower than the corporate tax or the income tax.) That’s just common sense and when it has to do with capital it’s something that most economists recognize and support. But if the same argument were made with regards to corporate taxes on manufacturing, most free market advocates balk. Cutting the federal corporate tax on manufacturing would be one way to prevent companies from moving offshore. Right now we’re too expensive (taxes + regulation) and we should remedy this.

      1. Joe M says:

        Joshua. I must respectfully but strongly disagree with you on this one. A) “Companies moving off-shore” is not the only way that industries become harmed by tax burdens. Wal-mart may not move off-shore. But, they’ll just hire less people, give lower salaries and/or raise their prices. That hurts people just as much as a company from some specific industry going off-shore. B) Manufacturing jobs aren’t the only ones going off-shore. Tech, customer service, writing, design. All kinds of other industries also have jobs going off-shore. Why is manufacturing more important than new-technology IT jobs? C) Where is the economic analysis that supports Santorum’s position? It’s an odious sign to me when numbers are thrown out like this without corresponding analysis about outcomes. It means that it’s about what someone wants to give, to whom, rather than having specific, calculated goals, the equitableness of which we can judge for ourselves. D) Taxes surely haven’t helped. However, the main reason manufacturing jobs have gone off-shore is cost of labor. Unions are to blame for that. But, going after the unions is dicey politics. I get the impression that this policy is not economically driven at all. It’s politically driven. Santorum is courting the union vote. And that is all kinds of wrong.

        1. Joshua Mercer says:

          I don’t think it’s wrong for Republicans to try and win blue-collar workers. In fact, that’s the reason Ronald Reagan was elected president in 1980. Reagan Democrats from Macomb County, Michigan. Trying to court union leadership would be foolish, but trying to win over more blue-collar workers is smart politics. As for manufacturing — yes, I do not have any numbers at my fingertips on how much manufacturing has declined in this country. I live in Michigan and see it every day, though. That manufacturing has declined in the United States was I thought indisputable. I’m not saying we have to have the same world’s share of manufacturing that we did in 1970 (that won’t happen), but ensuring that we don’t continue sliding further would be a smart economic plan. After a long slide, manufacturing has actually gone up in each of the last two years. But before that it had fallen every year since 1997. The New York Times reports: “There has been a long decline in manufacturing employment, which peaked in 1979 at 19.6 million workers. Now even with hiring over the last two years, the figure is 11.8 million, a decline of 40 percent from the high.”

          Also, I recognize that high business taxes hurt all sectors of the economy, like retail (Wal-Mart). I was just noting that Walmart will react to this by raising prices or (as you note) cutting costs in other ways (less workers, less in wage/benefits, etc.) rather than leaving the United States. As I noted, Santorum is calling for a tax cut for all businesses. It’s just that his tax cut on manufacturing is much larger. And he gives a reason for it that makes sense.

          1. Joe M says:

            Joshua. Thank you for your reply. I agree that it’s not wrong to win blue-collar workers. However, we don’t need to pick and choose winners and losers in order for conservative policies to help blue-collar workers. Reagan’s policies were top-to-bottom. Not breaks for one group and huge breaks for another. — I don’t doubt that manufacturing has declined more than some industries. However, uneven tax breaks is not the right way to address it. We need to get away from government using taxes in this way entirely as it is the reasoning that has led to all kinds of well-intended but then long-lasting negative consequences. Farm subsidies for example.

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