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Commentary: Rep. Love offers taxation with reverse representation

Republicans in Congress represent the interests of their donors and not their constituents.

Rep. Mia Love, R-Utah speaks during the Conservative Political Action Conference (CPAC) in National Harbor, Md., Thursday, Feb. 26, 2015. (AP Photo/Carolyn Kaster)

Rep. Mia Love’s constituent conference call on Oct. 24 was a perfect example of how Republicans in Congress represent the interests of their donors and not their constituents.

The subject of the town hall was taxation.

A root-and-branch review of our taxation system is desperately needed. However, Love trotted out the same old GOP tropes that have repeatedly been debunked. The two such issues discussed by Love in the conference call were the inheritance tax and cutting taxes on corporate profits.

The Republican Party wants to cut corporation tax and are selling this with the myth that it will create jobs. This is not how businesses or business tax works.

Corporations do not hire people because they have spare cash. No well-run business has a single employee more than is needed, regardless of how much profit the company has.

This fallacy was proven during the corporate tax holiday in 2004, when tax on repatriated profits was cut temporarily to 5 percent. Companies brought back $362 billion to the U.S. and used the money to pay dividends to shareholders and execute share buybacks. It was calculated that of every $1 lost in tax revenue, 92 cents of it was distributed to shareholders.

This strategy is taught in business school. If there is extra cash, pay dividends and undilute shares so the prices of remaining shares go up.

Three years after this tax holiday, the 15 largest benefiting companies actually shed 20,000 jobs. (This was before the recession.)

If a company will lose a slice of their profit in taxes, they reinvest that profit to expansion, or research and development costs that count against their profits thus reducing their tax burden.

If you want to create jobs, you need to raise corporation tax.

Love called the inheritance tax an unfair burden on Americans during her constituent conference call.

Currently, a couple can pass on nearly $11 million to their children tax-free. Under this system, only 0.2 percent to 0.4 percent of American estates end up owing any taxes at all after taking advantage of trusts, etc. Yet, the Republican Party wants to eliminate taxation on inherited wealth under the cry of, “Family farms and businesses are being lost!”

It is estimated, only 50 farms or small businesses in America will be affected by the estate tax in 2017. They can spread the payments over many years at low or no interest. If that’s a hardship, why not adjust the law to those farms without also giving a massive tax cut to the Waltons, Trumps and Kochs?

This will strengthen and perpetuate in America the same system of inherited wealth and privilege that crippled Europe for centuries, the very system of inherited privilege that our founding fathers fought a war to be free from.

The combination of eliminating inheritance tax and the reduction in corporation tax creates a situation where wealth will accumulate with increasingly exponential amounts those who already have it. The wealthy will generate more income from their investments, they will pay less tax on their income and accrue even more wealth, and then pass that wealth on to the next generation.

This is not an oversight of the GOP. They are deliberately working to create a situation where the wealthy get wealthier with each passing generation, or as it was called in Europe, the Feudal system.

This proposal will not benefit the vast majority of Utahns but it will benefit Love’s true constituents: wealthy businesses and wealthy donors.

Alicia Smith | Utah's CD4 Coalition

Alicia Smith, West Jordan, is a member of Utah’s CD4 Coalition.