Rep. Neal Explores Economic Policy Making with Isenberg Finance Students
November 13, 2013
"Austerity in an economic downturn--I disagree with that vehemently. And I'm an avowed capitalist," observed U.S. Representative Richard Neal in Alternative Investments, a course taught by Isenberg finance professor Mila Getmansky Sherman. "It's an ill-conceived belief that tax cuts pay for themselves," the Massachusetts Democrat continued, citing the Bush Administration's $2.3 trillion in tax cuts in 2001 and 2003. The cuts, he emphasized, came on the heels of balanced budgets during the last four years of the Clinton Administration. "With the Bush cuts, economic growth became the most anemic since Hoover," noted Neal, who for a decade has also taught a journalism course at UMass Amherst.
As a member of the House Ways and Means committee since 1993, Neal has influence on U.S. economic policy making, including taxation. "Every tax measure begins in House Ways and Means," he told the class. "Taxes that are too high, of course, will slow growth," he continued. The objective, he observed, is to strike a balance in taxation that fosters growth while "improving the life of all Americans." That, for example, would incentivize higher education. Current unemployment among college-educated Americans, he noted, is at 4%. It's at 8-9% for high school graduates, and 16% for high school dropouts.
Still, the American corporate tax rate is currently too high at 35%, he conceded, even though the effective rate with exclusions and preferences is 13-16%. What's more, he said, "unlike the rest of the world, we tax foreign income twice." We want, he advised, a tax and incentive system that rewards innovation and entrepreneurship. "What's happened on the energy front," for example, "has been astounding," he remarked. "Natural gas is putting coal out of business. There's more oil in North Dakota than in (Alaska's) Prudhoe Bay! And today, appliances, including autos, are "staggeringly more energy efficient."
But Neal has brooked little patience with American corporations that once avoided paying federal taxes for workers hired through offshore shell headquarters. His legislation to end that practice became law in 2008. And in a more recent bill, Neal has sought to remove a deduction favored by U.S. corporations on their premiums to overseas re-insurers. (The arrangement gives the latter an advantage over American insurance companies.)
"Take some risks before you're locked in," Neal encouraged the students. "If you fall down, there's plenty of time to get back up. Remember, America still rewards smarts. As Democrats, we don't guarantee outcomes, we guarantee your getting to the starting line."