Austin businessman David Hartman has been a strong advocate here in Texas for replacing the "Robin Hood" scheme of high property taxes with a business activities tax.

More recently, he had turned his attention to the federal tax system, particularly the corporate income tax.

If you are concerned about our huge trade deficits and loss of manufacturing jobs in the U.S., you had better listen to what David Hartman has to say. He makes a good case in a series of papers he has written on our federal tax system that the current way we tax business in the U.S. has the perverse effect of penalizing savings and capital investment while providing incentives to ship our manufacturing jobs overseas.

Mr. Hartman’s solution is to substitute "a border-adjusted tax’ for the corporate income tax. The tax is border adjusted in that it would exempt exports and tax imports. Mr. Hartman has examined the current revenues received by the corporate income tax and maintains that a "17.5% rate would generate sufficient tax to meet the requirement of tax-revenue neutrality" if we went to a border-adjusted tax.

By changing the way we tax businesses located in the United States, overnight you would begin to see the effects of a revitalized U.S. manufacturing sector and a lessened dependence on nations like China and Japan to continue to fund our massive trade deficits. As Hartman notes, "such a plan would foster extraordinary growth and investment – most particularly, in a resuscitated manufacturing sector."

Just as the Sharp Commission here in Texas is beginning to take a serious look at the Hartman proposal to replace the Robin Hood school finance scheme with a business activities tax, so also is President Bush’s Advisory Panel on Federal Tax Reform beginning to consider a border-adjusted tax as a possible replacement for the present corporate income tax system. David Hartman has an article on that subject in the January issue of Chronicles Magazine entitled "A Step in the Right Direction." To read that article, link here.

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