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Smith argues that businesses could be given many more incentives to invest and create products. "Our tax code favors the financial sector, speculation and leverage at the expense of the capital-intensive or the industrial sector," he says. Smith advocates lowering U.S. corporate tax rates, which are the second highest in the industrialized world. The corporate tax brings in only 8% of federal tax revenue anyway, Smith points out. He also calls for a "territorial tax system," which would tax only domestic, rather than worldwide, income, bringing U.S. practice in line with most other rich countries'. And Smith supports more incentives for businesses to spend on equipment and software. Right now, because of tax and other policies, Smith notes, "if you have a dollar to invest, you are better off investing that dollar someplace other than the United States."
These are all good ideas--and the Obama Administration has acted on many of them already. (In fact, both Obama and Romney favor reducing the corporate tax rate.)
But if the investment produces jobs, why not also increase government investment? President Obama should announce a growth agenda that combines incentives for businesses to spend with policies that also get the government back in the business of investing--in bridges, highways, airports and other aspects of the U.S.'s aging infrastructure. If the goal is jobs and growth, it can't hurt to try all the best ideas, no matter where they come from.
TO READ MORE BY FAREED ZAKARIA, GO TO time.com/zakaria