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Example research essay topic: U S Trade Billion A Year - 1,477 words

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... on. 9 Sema tech was launched in 1986 to promote the U. S. microchip industry over rivals in Japan and Germany. It spent several billion dollars of U. S tax dollars for the purpose of boosting the sales and profitability of U.

S. chip producers -- such as Intel. Now, some twelve years later and after spending taxpayer funds to prop up Intel, the Federal Trade Commission is spending taxpayer dollars to sue Intel under antitrust statutes for being too big and too profitable. As these examples demonstrate, government provides special benefits to individual industries and companies through a vast array of policy levers. The three major business benefits doled out by Congress are spending programs, special tax breaks, and trade protectionism. Tax Breaks When former labor secretary Robert Reich protested against "aid to dependent corporations" back in 1995, his criticism was directed toward "special tax benefits for particular industries. " 10 The Democratic Leadership Council's Progressive Policy Institute has specified some thirty such "tax subsidies" that led to a loss of $ 134 billion in federal revenues over five years. 11 One of the most inefficient and unwarranted tax subsidies is provided to the industry that produces ethanol -- a corn-based gasoline substitute.

Ethanol enjoys two tax breaks: a tax credit for companies that blend ethanol and an exemption from federal excise taxes. 12 The tax breaks are allegedly justified on the grounds that they reduce pollution and U. S. dependence on foreign oil. But a U.

S. Department of Agriculture study finds that the $ 500 million subsidy for ethanol "represents an inefficient use of our nation's resources. " 13 It concludes, "When all economic costs and benefits are tallied, an ethanol subsidy program is not cost effective. " 14 As for the supposed energy conservation and environmental benefits, a study by agricultural economist David Parental at Cornell University discovered that "about 72 percent more energy is used to produce a gallon of ethanol than the energy in a gallon of ethanol. " 15 Politics, not economics, is the principal motivation behind the ethanol subsidies. Archer Daniels Midland (ADM), a $ 10 billion agribusiness based in Decatur, Illinois, produces 70 percent of the ethanol used in the United States. 16 An estimated 25 percent of its sales are of ethanol and corn sweetener (another highly federally subsidized farm product). 17 ADM and its CEO, Dwayne Andreas, have been among the nation's most generous campaign contributors, having given more than $ 150, 000 in lifetime contributions to former Senate majority leader and 1996 GOP presidential nominee Bob Dole alone. 18 There are scores of other targeted tax breaks that unjustifiably distort competition and create an uneven playing field among and within industries. Just as government should not use spending subsidies to pick industrial winners and losers, it should avoid using the tax code for that purpose. But one point deserves special emphasis.

The problem with the tax code today is not, as many on the left have charged, that corporate America pays too little tax. Most firms today face too high a tax burden, not one that is too low. In 1995 the tax rate on corporate America came to 35 percent of net income. Further, with federal tax collections now above $ 1. 75 trillion the case that Washington suffers from too little tax revenue is unconvincing. Research suggests that policies designed to bring additional dollars into the federal treasury would only invite higher congressional spending, not lower debt. 19 As such, the goal in the fight to end corporate favoritism by government should not be to add to the aggregate burden on businesses but rather to spread the existing burden in a more equitable fashion. We should aim to close inefficient loopholes, level out the economic playing field, and use the savings to cut tax rates on all businesses -- thus enhancing overall U.

S. competitiveness. Congress should abolish all tax deductions, including all of the special tax breaks for industries identified by the Progressive Policy Institute, in exchange for lower overall corporate and personal tax rates on business and personal taxpayers. That could be accomplished through a flat tax, as advocated by Representative Dick Armey and Steve Forbes; a national sales tax replacement of the income tax, as proposed by Ways and Means Committee chairman Bill Archer; or any policy that lowers rates and broadens the tax base. 20 Trade Barriers "Most of the statutes, or acts, edicts, and placards of parliaments, and states for regulating and directing of trade, " wrote Benjamin Franklin, "have been either political blunders or obtained by artful men for private advantage under pretence of public good. " Franklin was two hundred years ahead of his time in this observation. He would no doubt be aghast if he observed the entangling web of special interest trade protections that have been erected in recent decades. In 1993 there were more than thirty-six hundred product tariffs and quotas imposed by Uncle Sam, all obtained for private advantage under the pretense of public good. 21 By erecting trade barriers, the government rewards one domestic industry at the direct expense of another.

For example, in 1991 prohibitive duties were placed on low-cost Japanese computer parts. The motivation was to save jobs in U. S. factories that make computer circuit boards.

But the decision to keep out foreign parts inflated by almost $ 1, 100 the cost of a personal computer manufactured by U. S. companies, such as IBM, Apple, and Compaq. 22 That gave a huge advantage to Japanese computer companies; it significantly reduced sales of the U. S. computer firms; and, worst of all, thousands of American jobs were lost. Steel import quotas are equally economically injurious to American manufacturers.

Trade specialists believe that the inflated steel prices paid by U. S. firms have contributed to the competitive decline of several American industries, including the auto industry. The cost to the American economy of steel quotas is estimated at $ 7 billion a year. 23 No one knows precisely the total cost to American consumers of barriers to free trade.

But several authoritative sources place the figure at $ 80 billion a year. 24 There is virtually no specific U. S. trade restriction the economy wide costs of which do not exceed the industry-specific benefits. Therefore, Congress should immediately lift all barriers to free trade. If tariffs are to be imposed at all as a revenue-raising method, they should be uniform among all products and should not violate U.

S. trade agreements. Federal Outlays for Business Subsidies The most pervasive and pernicious form of corporate welfare is the system of direct federal expenditures. These include government provision of grants, contracts, loans, credit guarantees, and insurance. Most of the rest of this essay focuses on these direct spending subsidies. The Corporate Interest versus the Public Interest So what has corporate America's response been to these indefensible taxpayer payments?

Back in 1992 when the budget deficit hit its high-watermark of $ 290 billion, the CEOs of scores of major highly profitable corporations jointly signed a preachy letter calling on Congress to end its cowardice and stop the financial madness of deficit spending. They called for tough choices and a budget of sacrifices. And then Ralph Nader, of all people, undertook an enlightening experiment. He wrote to these CEOs asking how many would be willing to give up their own subsidies.

Are you willing, he asked them, to give up the Export-Import Bank, the Overseas Private Investment Corporation, the International Monetary Fund, or energy department subsidies? Nader got virtually no takers on his offer. Corporate America's communal response was sacrifices, yes, self-sacrifices, never. In fact many corporations actively fought the feeble efforts of Republicans in Congress to cut off federal aid to business. The Export-Import Bank, which uses federal dollars to provide insurance to major U. S.

corporate investments and contracts overseas, for example, was saved thanks for a massive lobbying effort by major U. S. exporters. Meanwhile, on the tax side of the giveaway equation, the rout of the reformers has been even more complete. The battle to clean out all corporate loopholes and move to some kind of simple flat tax system was torpedoed by corporate special interests jealously protecting their multibillion dollar carve-outs. The home builders, realtors, mortgage bankers, accounting industry, municipal bond traders, life insurance lobby, tax attorneys, and others banded together to squash any serious effort at tax simplification and reform.

In fact, the tax code has more corporate carve-outs today than it did five years ago. We have made the internal revenue code even more special interest friendly -- a seemingly impossible mission. The stock values of the tax preparation industry -- that is, the H& R Blocks of the world -- grew at three times the rate of the Dow Jones average between 1996 and 1998.


Free research essays on topics related to: corporate america, tax breaks, trade barriers, u s trade, billion a year

Research essay sample on U S Trade Billion A Year

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