Draskoci-Johnson’s tax ‘facts’ wrong
By Stan Gudmundson | Rushford, Minn.

A local “economist” whose fame has spread throughout eight or nine counties and a couple of townships plus a small mosquito control district has recently provided us with a new revolutionary set of economic “facts” more commonly known as assertions. However, I am a little confused.

Jeff Draskoci-Johnson says we should cut all taxes on businesses and then says that “businesses pay little attention to taxes when deciding to locate.” But, why should we cut business taxes if they don’t care about taxes? Isn’t there a logic problem here?
While I do agree that we should abolish taxes on publicly held corporations, I don’t agree in eliminating taxes on all businesses. Privately held corporations and individuals who have incorporated themselves as a business would then pay no taxes at all. Not good.

Publicly held corporations are pass-through organizations. That is, the money they make is money you and I pay them for their products and services. We pay their taxes by buying from them. Moreover, these taxes are hidden taxes for us. Worse, we double tax corporations by taxing both corporate profits and also individual dividends. Furthermore, when U.S. corporations sell their products overseas, they must pay additional taxes if the corporate tax rate of that country is lower than our own. The corporate tax rate in Ireland is 12½ percent and ours is 35 percent, the second highest in the industrial world. U.S.-based corporations have to pay additional taxes on the difference between Ireland’s 12½ percent and our 35 percent.

Obviously, all this puts U.S. corporations at a competitive disadvantage. And you wonder why some companies are moving their corporate headquarters to more tax-friendly states or countries? They have to be able to compete if they are going to stay in business after all.

Draskoci-Johnson’s “fact”: “Businesses pay little attention to taxes when deciding where to locate” is a remarkable assertion, demonstrably false. Corporations have been moving their operations offshore to avoid taxes and liberals have been whining about it. Moreover, you might notice that foreign auto companies aren’t building many manufacturing plants in Minnesota. The evidence is overwhelming but you may also wish to note where many “Taxachusetts” businesses (along with their people) are moving — to the nearby tax friendlier state of New Hampshire.

Economist Tom Sowell says that “when statistical categories are compared over time, the changing relationships among these categories can be completely misleading when the composition of these categories is changing over time.” In other words, comparing the mercantilist 19th century with today’s economy is virtually impossible.

But we do know the depression of the 1930s was caused by government. Mr. Bernanke, the current chairman of the Federal Reserve, said, “Regarding the Great Depression ... we (at the Fed) did it. ... We’re very sorry. ... We won’t do it again.”

The only other “fact” that Draskoci-Johnson presents that has a scintilla of truth to it is that the “Clinton economy was broader-based than that of Reagan’s.” Well, duh.

Clinton governed as a supply-sider for six of his eight years as president principally because Congress was controlled by Republicans for six of those years. He inherited a growing and vibrant economy from his predecessors, which should have and did expand. Of course, there was that little tech bubble thing that dropped the stock market into the tank. SSssssh!

“Allowing Bush’s tax cuts to expire will solve our fiscal crisis without hurting growth and it’s the only solution available.” So says our local economist. But increasing taxes during a downward economic cycle is like trying to improve your auto’s gas mileage by driving with one foot on the brake and the other on the accelerator.

Draskoci-Johnson also says that “we spend too much” is a sound bite, not a plan” and asks “what would (I) cut?“

If the fiscal crisis he speaks of is the deficit, economist Thomas Sowell points out that “For most of its history, the United States has been a debtor nation and has likewise had the highest standard of living in the world.” But the real problem is Social Security, Medicaid and Medicare. They are not sustainable. They will consume the entire federal budget by 2045 if we don’t get this under control. Also, under this president, government spending has exploded. There is enormous potential to cut the budget.

But I submit for you some of Draskoci-Johnson’s other wildly false assertions.

1. “George Bush’ tax cuts were much deeper than Reagan’s.”

2. “Reagan-type tax cuts are largely irrelevant to growth.” This one belongs in a special lunacy category all by itself.

3. “Allowing (Bush’s) tax cuts to expire will hurt only businesses that cater to multimillionaires.”

Draskoci-Johnson concludes by asking us to “Please, learn the facts.”

Yes indeed, Mr. Draskoci-Johnson, yes indeed. For the layman, read Milton Friedman’s classic “Free to Choose” and Tom Sowell’s two recent books “Basic Economics” and “Economic Facts and Fallacies.” Sowell’s books, by the way, squashes flat virtually every assertion that Mr. Draskoci-Johnson made. When you’re done with these I have a few more recommendations.

Thanks for the entertainment Draskoci-Johnson. I’m looking forward to your next installment of hanging curve balls.

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