By Robert Pembroke
In 2004, Congress passed a bill that allowed companies to bring overseas assets back home if they paid a tax of only 5 percent and during the next three years, 15 of the companies that repatriated assets raised the salaries of their senior executives, cut 20,000 jobs, decreased investment in research and expanded dividends and stock buybacks, according to The Wall Street Journal.
From the limited knowledge that I have on what the Republicans are trying to do with taxes, I am very disappointed. First, I do not believe they are doing enough to cut the taxes of the middle class and, second, I am really concerned that they are not treating small business fairly in their new tax proposals. And now I see that Sen. Ron Johnson, R-Wisc., agrees with me that small businesses are getting a raw deal.
Sen. Johnson has declared that he will not vote for the Senate version of tax reform as it stands now. And he further states that the Senate members who are writing the plan are misleading the public about the nature of the tax overhaul because they are prioritizing big business over “pass-through” entities such as sole proprietorships, partnerships, limited liability companies and Sub-chapter S corporations. Our company was an S corporation.
The only way that America will be able to build its manufacturing base is if there is a technological breakthrough that substantially reduces the cost of manufacturing labor. So, this is why Sen. Johnson and I want the pass-through rates for smaller businesses to be the same as the tax rate on big business — because it’s America’s best chance to create a lot of well-paying jobs.
Under current law, pass-through profits are taxed once, at their owners personal rate of up to 39.6 percent. Large corporations’ profits are taxed twice — once at the corporate level, and then again when they pay dividends to their stockholders. Big business says that this is why they need a different rate than small businesses.
Johnson is proposing that big business be treated like pass-through business — and guess who his ally is in the Senate? Sen. Orrin Hatch, R-Utah, has been talking about ideas that are heading in that way. But according to the early releases of what the Senate tax plan is, Hatch and Johnson haven’t been able to sell other Senate Republicans on the idea.
I was a critic of John McCain of Arizona, Susan Collins of Maine and Lisa Murkowski of Alaska for voting against the Senate “skinny version” of Obamacare repeal and replace. I am now rethinking that position in light of what Johnson wants to do with tax reform. What if everyone just stopped playing politics and just did the right thing when it comes to taxes and healthcare?
Both these measures should be bipartisan and carefully thought through. The big question is how are we going to get our elected officials to do this. I would like to propose that the only way we can do this is to take lobbyists and special interest groups out of the picture. How we do that is a real brain twister and the only possible solution is to educate the voter about what is in the best interest of themselves, their families and the nation.
“Many forms of government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, in 1947, Winston Churchill said that “democracy is the worst form of government except for all those other forms that have been tried from time to time.” With this in mind, how are we going to win the hearts and minds of the electorate?
I believe it is going to take time — a lot of time — and we need not be concerned with promises made by our elected officials. They are using these promises as a way to put silver and gold in their pockets and buy a lot of votes.
Robert Pembroke is the chairman of Pembroke’s Inc. and considers himself to be on permanent sabbatical. He can be reached at pembroke894@gmail.com.