Bring Jobs Home to America - Presentation 062111

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    Bring Jobs Home to America Replace the job-killing,

    Corporate Tax System with aborder-adjusted, business

    consumption tax.*

    *As originally proposed by Austin businessman David Hartman

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    Bring Jobs Home to America

    Since 1974, manufacturing employment has fallen from 24% of total U.S. jobs toless than 9% in 2011.

    Manufacturing Employment

    Total US Non-farm Employment

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    Bring Jobs Home to America

    Since the official start of the most recent recession

    Jobs in the manufacturing fellfurther proportionally thanany other sector of theeconomy except construction.

    In April 2011,

    Manufacturing jobsremain nearly 15% below pre-recessionlevels, while total U.S.non-farm employmenthas regained 95% of levels on Dec. 2007. Manufacturing Job Changes

    Total US Non-farm Job Changes

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    U.S. Manufacturing job losses over thelast decade

    Essentially all (U.S.) joblosses are high wage

    manufacturing, and most gainsare in low-wage services. In

    essence the U.S. economy isrestructuring downward, whilethe Chinese economy is

    restructuring upward.-Kurt Richebcher

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    Bring Jobs Home to America

    Decline of Capital Goods Made in the U.S.A.

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    The Business Consumption Tax (BCT) is a revenue-neutralreplacement of the Corporate Income Tax and the employer

    portion of the payroll tax. All goods and services coming into the U.S. pay the 8% tax;

    all companies exporting receive a comparable tax credit. Exported goods and services would not be subject to the BCT

    and would receive rebates or credits on BCT paymentsmade on capital inputs.

    Bring Jobs Home to America

    Leveling the Playing Field with an 8%

    Business Consumption Tax (BCT)

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    Border-Adjusted Business Consumption Tax (BCT )

    What is a BCT?A consumption tax collected on goods and services entering the country(and domestic sales) and rebated for taxes paid on capital purchases.

    Who uses it? Nearly every OECD nation except the U.S.

    What are the advantages?BCTs benefit exports over imports because outside sales do not have to

    pay the home nations BCT. The increased revenues from BCTs also have

    allowed our largest foreign competitors to lower statutory and effectivecorporate income tax rates.

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    U.S. Tax Disadvantages with Our Trading

    Competitors Nation(s) Border-Adjusted Tax RateUnited Kingdom 20%

    France 19.6%

    Germany 19%

    EU 15 Avg. 20.77%

    China 17%

    Canada 5 to 13%

    Mexico 16%

    India 12.5%Rates for India and Canada vary by region/province. Canada's current VAT rateis 5% (down from 7%) - harmonized tax rate includes province sales tax.

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    For an American-made Cadillac seeking to compete on the German market with a

    Mercedes Benz of comparable value:The Cadillac sells for $50,000 in the U.S. but is hit at the German border with a 19%

    border-adjusted tax. Selling the same car in Germany puts the U.S. manufacturer at a19% disadvantage against the European-made Mercedes.

    Meanwhile, the Mercedes manufacturer competing in the U.S. does not have to pay our corporate income tax or employer portion of the payroll tax, nor does it have to pay a

    border-adjusted tax since the U.S. doesnt have one.

    E.g., Auto Sales between U.S. and Germany

    Producer US Market German MarketUnited States(Cadillac)

    Add 19%$50,000 $59,500

    Foreign VAT Germany(Mercedes)

    Subtract 19%$42,016 $50,000

    Foreign VAT

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    Between state and federal income taxes, U.S. corporations facestatutory rates roughly 14 percentage points above the averagefor all OECD nations.

    The revenues raised by BCTs have allowed many exportingnations to increase competitiveness by lowering corporateincome taxes or tailoring tax to protect specific industries.

    By eliminating the corporate income tax and allowing for theexpensing of capital, the U.S. could better compete for new

    businesses and capital investment.

    Bring Jobs Home to America

    Reducing the Corporate Tax Burden

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    Bring Jobs Home to America

    Reducing the Corporate Tax BurdenA recent study byPricewaterhouseCooper found that [A]mong thecompanies on the ForbesGlobal 2000 list for 2010,U.S.-headquartered

    companies had an averagefinancial statementeffective tax rate of 27.7

    percent over the 2006-2009 period, compared to anaverage rate of 19.5 percent

    for their foreign-headquarteredcounterparts.

    Business Roundtable Study: Global Effective Tax Rates, April 14, 2011. PwC calculations based on data from S&Ps Global Vantage database.

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    Changing the way we tax U.S.-based

    businesses will benefit small businessesA joint study byIBM and the InternalRevenue Service

    found that businesses withfewer employeeshave a significantlyhigher compliancecost for paying taxesunder the currentstructure.

    Source: Estimates of U.S. Federal Income Tax Compliance for Small Businesses

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    The corporate income tax encourages tax-driven

    decision making rather than business-based decisionsThe chart to theright illustratesthe number of

    businesses thathave changedtax status toavoid doubletaxation on

    personalincomes andcapital gains.

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    Corporate Income Tax: An Inefficient Revenue

    Source

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    The current tax system punitively taxes capital investment, employment, andsavings in the U.S. It encourages tax-driven strategies of debt accumulation

    because debt is tax-deductible.

    A study from the American Enterprise Institute showed a negative correlation between high Corporate Income Taxes and workers wages (Hassett andMathur 2010).

    I fundamentally don't understand the logic of corporate income taxes, said C. Larry Pope, CEO of Smithfield Foods. If I have a 35% tax, all I do is takethat 35% tax and I transfer it into the price of bacon and the price of pork chops. (Wall St. Journal, April 2011)

    The Corporate Income Tax is only collected

    by Corporations

    Bring Jobs Home to America

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    For clarity, the example uses a 10-percent BCT.

    How a Business Consumption Tax works

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    Industries receive a rebate or credit on exported goods leaving the country, soas to avoid double taxation on foreign consumption taxes.

    The tax is levied in full on imports entering the U.S. the same as in other countries we export to.

    o re ig n e xp or te r%s taxed 8 at

    he border

    . .S exporter eceives a tax

    b at em en t o n oods sold

    .verseas

    Bring Jobs Home to America

    How the Business Consumption Tax works froman export-import standpoint

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    Bring Jobs Home to America

    Bring Jobs Home to AmericaTom Pauken is Chairman of the Texas Workforce Commission (TWC), where he has served

    since being appointed by Governor Rick Perry in March 2008.He served in the White House Counsels Office under President Reagan, and was appointed bythe President to serve as Director of ACTION, now known as AmeriCorps. At ACTION, Mr. Paukenfounded the Vietnam Veterans Leadership Program and implemented Nancy Reagans Just Say Noto Drugs campaign. For his meritorious service as director of program, he was awarded the RonaldReagan Medal of Honor by his fellow Reagan administration alumni. In 2007, he served asChairman of the Governors Task Force on Appraisal Reform.

    Chairman Pauken is a United States Army veteran. He received a commission in MilitaryIntelligence and served in Vietnam as a Province Intelligence Officer and as a senior analyst for theOffice of Strategic Research Analysis.

    Founder and President of Dallas-based TWP Inc. Chairman Pauken has also served as a boardmember of various public and private companies.

    Chairman Pauken is the author of the book, The Thirty Years War: The Politics of the SixtiesGeneration, and most recently, Bringing America Home: How America Lost Her Way and How We

    Can Find Our Way Back . He holds a bachelors degree from Georgetown University and a lawdegree from Southern Methodist University.He and his wife, the former Ida Ayala, have seven children and 12 grandchildren.