Thom Hartmann: So what kind of impact do taxes have on the United States? We had over 3.3 % growth in every single decade, in the ‘50s, ‘60s, and ‘70s. We haven’t quite hit that since then. What could have done it? I don’t know. Curtis Dubay is with us, he’s a senior policy analyst at the Heritage Foundation specializing in tax issues. Heritage.org, of course, the website. Curtis, welcome.

Curtis Dubay: Thanks for having me.

Thom Hartmann: Thanks for joining us. John Boehner has come out and said, along with many other republicans, and said they want to continue the Bush tax giveaways and I call them giveaways because we’re borrowing the money from China to give it to them, it’s funded by the deficit, to the rich and the ultra rich. We just had David Cay Johnston on, his stats are over at Tax.com but you can also pull it together from government statistics. Pretty straightforward. If you look, you know when Bush came into office in 2000 he promised that his tax cuts would create more income and more jobs but total income of working people in the United States was down over that eight year period by 2.74 trillion dollars. How do you, how can you reconcile continuing these insane tax giveaways?

Curtis Dubay: You have to look at it, we were coming out of one recession when Bush came into office and then went into another one when he was leaving office. During the intervening years we had very robust economic growth. And part of it, part of that growth is certainly owed to, especially the 2003 tax cuts which reduced income tax rates and reduced taxes on capital like the dividends rate and the taxes on capital gains.

Thom Hartmann: But it seemed, just common sense. I remember back in the ‘80s, I owned a business, International Wholesale Travel in Atlanta, Georgia. That business has, since we sold it done over 200 billion dollars in business. And there was a year when we were doing really, really well and I could either write a big check to myself or not. And I decided not to, because I didn’t want to pay the increased taxes. I put it back into the business. How can cutting taxes on rich people, on high income people, do anything other than encourage them to take the money out of their companies, out of their businesses, and buy fancy paintings or yachts or put it in Swiss bank accounts? How conceivably could that help the economy?

Curtis Dubay: Well, it doesn’t matter what they do with it, it’s going to help the economy.

Thom Hartmann: Of course it does. If they don’t spend it in the United States it has a huge effect on us. And we’ve seen net foreign, the, it’s been over 1.7 trillion dollars in the last ten years more money going out of the United States than coming into the United States in terms of investment. In other words, rich Americans are investing their money, but almost two trillion dollars more of that has been invested in other countries, particularly in China and Mexico, than in the United States. I’d say that’ the result of them having that money in their hands.

Curtis Dubay: But why is that? It’s because there are better opportunities abroad than there are here. And one of the reasons is that we have high taxes. High taxes on investment and the returns from investment. The way to keep that money here is to lower tax rates.

Thom Hartmann: No it’s because labor is cheaper in China and Mexico. It’s got nothing to do with, you know, and the other reason is, I’ll give you that, and it’s because Bill Clinton passed NAFTA and GATT and now the world is flat as Tom Friedman loves to say and so if somebody wants to invest in a factory in Mexico, they actually get a tax deduction for dismantling the factory in the United States and a tax deduction for the cost of shipping it to Mexico and a tax deduction for building it in Mexico and they can write off all those Mexican wages on their income taxes. The democrats are proposing today in congress…

Curtis Dubay: You say that like it’s some kind of uncommon thing. That’s business deduction, its own special deduction for moving a factory overseas. The reality is we have the most uncompetitive corporate income tax system in the entire world. We have basically the highest rate and we’re the only country in the world that taxes our businesses on the income they earn abroad. That’s one of the major reasons why the return to investing overseas is better than the return investing here.

Thom Hartmann: No, that’s why companies keep their money overseas. Because, that’s why they set up overseas subsidiaries, that’s why HP China is selling to HP. That’s why more than 50% of all of our trade is actually not trade, it’s actually companies outsourcing jobs. But you know none of that has to do with first of all the personal corporate income tax and secondly your comment about corporate income tax. Go back and look at the numbers. The United States has the highest marginal tax rate, you’re right, 35%, in the world, of the developed countries. But our corporations pay an average of between 8 and 9% which is the lowest of all the OECD countries. So...

Curtis Dubay: I don’t know where you’re getting your information on that. I have seen numbers that say our marginal tax rate is still the highest.

Thom Hartmann: From Treasury.gov.

Curtis Dubay: Okay I’ll look at that. But I’ve seen that our, well you’re looking at total effective tax rate. But the marginal effective tax rate, the one that determines where investment is made, the US is still the highest.

Thom Hartmann: But it’s not. Our companies are not paying, you know, Exxon Mobil last year, the most profitable corporation in the history of the planet, all the way back to the Roman Empire, got a multi-hundred million dollar tax refund. They paid no taxes. I mean the largest corporations in America are paying virtually no taxes. And you’ve got these companies like Bechtel that pretend it’s a small business, you guys talk about small business tax cuts, and you know, because they’re pass through companies, because they’re privately owned companies, and they’re paying, to the extent that they can take their income, and all these guys on Wall Street are doing, is take their income as capital gains or dividends, they’re paying a maximum 15% income tax. This is nuts.

Curtis Dubay: Well there, that’s certainly true if you get your income through capital gain you get a lower rate. But there’s a reason why we have that. It wasn’t because of a giveaway to Wall Street. It’s because it’s good for the economy. We shouldn’t be taxing…

Thom Hartmann: So it’s better for the economy to have an income tax on people who make their money sitting on their butts around the pool waiting for the dividend check of 15%. And on the guy who’s digging the ditch out in front of their house for 35%. How is that good for our economy?

Curtis Dubay: We shouldn’t be taxing capital at all, the tax rate should be zero on all...

Thom Hartmann: So people who make their living sitting on their butts around the pool waiting for the dividend checks should be pay no income taxes.

Curtis Dubay: Well they’ve already, they’ve paid income taxes on the income they earned to buy the stock which paid the dividend, so they’ve paid it before. And the corporation has already paid tax on that …

Thom Hartmann: But capitalism is making money on money rather than making money on labor. So you’re saying that capitalists should not pay income taxes but working people should.

Curtis Dubay: I think they’re all capitalists if you’re going out and you’re working hard and you’re earning money you’re a capitalist.

Thom Hartmann: No you’re not, you’re not a capitalist, you’re a worker. Look it up in the dictionary. A capitalist is a person who makes their money with capital. There are very few capitalists in America. Capitalists are people who invest cash and they get cash back on that money.

Curtis Dubay: Right and when they invest that money they create jobs for people who are working.

Thom Hartmann: Well one would hope.

Curtis Dubay: That’s the trick.

Thom Hartmann: One would hope. Okay, I get your logic. Curtis Dubay, people can read all about it over at Heritage.org. Senior policy analyst at the Heritage Foundation, specializing in tax issues. Curtis, thanks for dropping by today.

Curtis Dubay: No problem, thank you.

Thom Hartmann: Good talking with you. We’ll be right back. Thom Hartmann here in Washington DC at the headquarters of Talk Radio News.

Transcribed by Suzanne Roberts, Portland Psychology Clinic.