Northwest Indiana Discussion

House cuts corporate taxes

Supporters hope move leads to additional jobs [A worn out mantra?]

Niki Kelly | The Journal Gazette
Published: April 22, 2011 3:00 a.m.

The Indiana House voted 62-34 Thursday to cut the state’s corporate income tax rate – a move supporters hope will spur job growth.

“We will never know how many companies don’t give us a second look because of the high corporate tax,” Rep. Eric Turner, R-Cicero, said.

Area Republicans supported the bill with Democrats voting against it.

Indiana has placed high in recent years in numerous rankings on business climate. But the one outlier has been the state’s higher-than-average corporate income tax rate of 8.5 percent. Several surrounding states have lower rates, including Kentucky, Michigan and Ohio.

Senate Bill 589 decreases the corporate income tax from 8.5 percent to 6.5 percent over four years starting in July 2012.

The change will mean a loss of tax revenue for the state – starting with $18 million in fiscal year 2013 and rising to more than $80 million in fiscal year 2017.

To pay for the cut, the state will eliminate several tax credits and advantages.

Democrats argued it is the not the right time to give a corporate tax break, and they offered amendments that Republicans rejected to reduce individual income tax rates for low- and middle-income Hoosiers. The GOP also turned down efforts to increase home-heating aid.

“You were completely unwilling to do anything to help people really struggling – people on the lowest rungs,” Rep. Matt Pierce, D-Bloomington, said.

The tax cut provision also is in House Bill 1007, which passed the Senate on Thursday. Both are headed for conference committee for final negotiations.

[quote="Funny when the Dems have a majority the repubs are always crying about compromise, compromise or requiring a super majority (remember that?)...but when they are the majority the mantra is screw you we have the numbers [/color][/quote]


What goes around, comes around. What a f*****g cry baby...

Elections have consequences.

What i need to know is whether there is anything else I or we the people of Indiana can do for corporate Indiana? I sometimes feel ashamed that the recent property tax reform limiting taxes to no more than three percent on corporate property was all we could for them.

Like many others I keep asking myself, what more should we have done? What more could we have done? The property tax reform was so paltry and nowhere near an adequate expression of our appreciation of corporate America, and all it does for us, especially under the Treaties of the Americas, NAFTA, shipping jobs overseas to our allies in the third world. Moreover, we should repent for the criticisms about bailing-out Wall Street, and thereby keeping alive the Dream...and the humanitarian values of Wall Street.

And now, a two percentage point drop in corporate income tax...I just hope the companies don't misinterpret our action and feel we have insulted them. We just wanted to show our love and if possible eliminate corporate income tax altogether and, ideally, shift the burden to our citizenry. Pharaoh had right the first time around: Let the slaves make bricks without straw.

And double that for those Populists and Progressives. Equality! Bah, humbug. Equity? Fairness? Liberal pap. Nietzsche was right: enough of these slave-oriented concerns, slave morality, the humanisms of slave values - indeed, abolish the slave ethics of due care. The weak can inherit the earth when the strong are finished with it.

We should abolish corporate taxes.

Class dismissed? ROFLMAO...Pure mythology. This ain't blab school jarhead. Only utterly brainwashed morons still believe that pap...

Meanwhile, read what happened in Canada.

How Corporate Tax Cuts Can Actually Destroy Jobs
The Progressive Economics Forum
Posted by Jim Stanford under corporate income tax.
January 27th, 2011

Here’s a short description of the methodology used in explaining why allocating $3 billion of federal revenue to further corporate tax cuts (instead of other more effective stimulusmeasures) would actually destroy jobs (up to 46,000) on a net basis. It’s also available on the CAW site.

Corporate tax cuts have very little positive impact on employment, since they induce very little change in business capital investment spending. Historical evidence in Canada since 2000 (when the corporate tax rate, then 29.1%, began to be dramatically reduced) indicates that business investment has deteriorated since then – whether measured as a share of GDP, as a share of the existing capital stock, or as a share of corporate cash flow.

Indeed, business capital spending in recent years has fallen below realized business cash flow; companies have been accumulating cash and other liquid assets as a result. By the third quarter of 2010, the cash and short-term financial assets of non-financial businesses in Canada had reached $480 billion – almost a half-trillion dollars (source: Statistics Canada Balance Sheet data, CANSIM database). Since the advent of the recession two years earlier, businesses socked away an additional $83 billion in new cash. (This is in stark contrast to the behaviour of consumers and governments during this time, who incurred substantial new debt in order to finance expanded spending.)

Further enhancing the cash flow of business, with no strings attached to incremental investment undertakings, will accomplish nothing other than enhancing that large stockpile of idle cash even further.

When governments allocate large sums of revenue to corporate tax cuts, those resources are no longer available to fund other priorities – like extending EI benefits for laid-off workers, investing in infrastructure or housing, or supporting public programs through transfer payments (like health care or education). All of those programs create far more jobs than corporate tax cuts. Therefore, shifting money from EI benefits (or infrastructure or public services) into corporate tax cuts destroys net jobs.

We may now estimate the employment effects of the proposed $3 billion in corporate income tax cuts. According to the Dept. of Finance multiplier coefficients, the tax cuts would generate just under $1 billion in new GDP, and just under 10,000 jobs (equal to $3 billion times 3,310 per billion). In contrast, if the same funds had been spent on extending EI benefits, GDP would expand by over $5 billion ($3 billion times 1.7), generating 56,000 jobs ($3 billion times 18,755 jobs per billion). The net effect of the tax cut, compared to the allocation of equivalent funds to more powerful stimulative measures, is the elimination of 46,000 jobs. (In economic parlance, the foregone jobs that would have been created if the money had been allocated to other initiatives is the “opportunity cost” of the corporate tax cuts.)

Other foregone spending initiatives also have powerful job-creating impacts, which will be missed as a result of allocating the available funds instead to corporate tax cuts. $3 billion in infrastructure investment would generate about 53,000 jobs, while $3 billion in housing investment would generate just under 50,000 jobs.

By any measure then, allocating scarce resources to corporate tax reductions with such ineffective (even by the Dept. of Finance’s own estimation) impacts on GDP and employment, instead of to more powerful GDP- and employment-generating initiatives, will result in the substantial destruction of net employment – of as much as 46,000 positions in total.

Who do you think or from what source do you think the 2% savings in corporate income tax will be replenished?

Grown men and women should be ashamed of pie-in-the sky thinking.

Tell me you're not that THICK! Because Indiana is already running on fumes.

***

NWI/Gary Forecast 2011
Donald A. Coffin, Ph.D.
Associate Professor of Economics,
School of Business and Economics
Indiana University Northwest


The Business Cycle Dating Committee of the National Bureau of Economic Research has determined that the current recession began in December 2007 and that the recovery began in June 2009.1

There is widespread agreement that this has been the worst recession the U.S. economy has experienced since World War II, and the dimensions of the decline are striking. Between December 2007 and June 2009, employment in the United States declined by 5.3 percent, with a net loss of about 7.3 million jobs, and the unemployment rate rose from 5.0 percent to 9.5 percent.2 U.S. gross domestic product (GDP) declined during this period (fourth quarter 2007 to second quarter 2009) by 4.1 percent (using chained dollars).

In northwest Indiana, employment fell 7.2 percent, a net loss of 20,800 jobs, as the unemployment rate rose from 4.6 percent to 10.6 percent. GDP data are not readily available for the local economy, but total wages paid to employees in the broader northwest Indiana region fell by 15.2 percent between the fourth quarter of 2007 and the second quarter of 2009.3 It is clear that the recession hit northwest Indiana harder than it hit the nation.

Since the recovery began in June 2009, employment nationally has actually declined slightly (-0.25 percent), while the unemployment rate has increased to 9.6 percent (from 9.5 percent). Nationally, GDP has increased by 3 percent (through the second quarter of 2010). Growth in GDP during the early stages of this recovery has been disappointing, but is comparable to growth coming out of the 1991 and 2001 recessions.

Local employment in northwest Indiana has actually grown in recent months, rising by 1.3 percent between July 2009 and September 2010; as with the nation, however, this has not led to a decline in the unemployment rate, which is essentially unchanged (10.6 percent compared to 10.5 percent). Total wages in the first quarter of 2010 (the most recent data available) for the broader northwest Indiana region have continued to decline, down by 2.8 percent since the second quarter of 2009.

The last three years have been perhaps the most difficult period the U.S. economy has encountered since World War II, so the question is, “what we can expect going forward?”
My expectation is that growth in employment in northwest Indiana will do what it has usually done over the past 20 years—underperform both the state and the nation. Income growth is likely to be slower as well.

Major job losses are likely to continue in manufacturing. We expect the loss of around 900 manufacturing jobs (-2.3 percent), with most of that in the iron and steel mill sector (a loss of 530 jobs, or -3.5 percent.).

Other sectors seem likely to shed jobs as well, although in smaller numbers (and as a smaller percentage of employment). Job losses seem likely in the utilities, transportation and warehousing; finance; and real estate sectors.

Government will not be a significant contributor to growth in the coming year.
Aside from the pressure that is growing to reduce the federal government’s budget deficit, federal government employment is fairly modest in northwest Indiana (and we expect a modest decline in it).

The state and many local governments are also under considerable pressure to reduce their spending levels in order to meet the mandate in the Indiana Constitution to have balanced budgets.

Thus, we expect only slight growth in state or local employment, with almost all of that concentrated in local public education. Overall, we expect government employment to grow by roughly 0.2 percent, about the same as overall employment.
According to Reuters, the consensus forecast for the U.S. unemployment rate by the end of 2011 is 9 percent.

Concluding Remarks

The recession hit northwest Indiana severely. Not only were job losses large, they were concentrated in the highest wage sectors of the economy (construction, manufacturing and finance). We expect growth in only one of these hard-hit sectors over the next year, and construction will remain severely below its potential.

Unless national economic growth is substantially more robust than expected, there is little reason to expect much upside to our forecast. The northwest Indiana economy will do better than it has done in 2009 or 2010, but the coming year will not bring a boom. What lies ahead is likely to be less unpleasant times, rather than a robust recovery.

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***This article defines northwest Indiana as the four-county Gary Metropolitan Division. The broader northwest Indiana region includes seven counties: Jasper, Lake, LaPorte, Newton, Porter, Pulaski, and Starke.