Even Vladimir Putin gets it. About tax cuts at least. From today’s Moscow Times:
Prime Minister Vladimir Putin unveiled a new $14.6 billion measure Thursday aimed at helping businesses withstand the current economic downturn, spending likely to further drain the Reserve Fund next year.
Putin, the leader of United Russia, although not a member, made the announcement at the ruling party’s congress in a speech focusing on countering current economic woes.
The current global downturn has hit Russia hard, both economically and psychologically. The country is utterly dependent on revenue from oil and gas and has, over the past few years, built up quite a reserve fund from petroleum exports.
Ten years ago Russia’s banking system collapsed, wiping out the savings of millions. Even today, most Russians keep their cash close and avoid banks, paying for major purchases out of pocket. This sense of unease and fragility has, needless to say, been amplified in recent weeks.
And in his announcement, Putin hearkened back to 1998:
“We will do our best to prevent the problems of past years, the collapse of past years, from repeating itself in our country again,” Putin said, in a direct reference to the collapse of the Soviet Union in 1991 and the difficult economic times that followed, leading up to the default crisis in August 1998.
But the package he announced would make businesses happy in any country:
In the most expensive of the proposals, Putin vowed to cut profit taxes by 4 percent, to 20 percent, effective in January — a move estimated to reduce federal budget revenues by more than 400 billion rubles ($14.6 billion) next year.
“All this money will remain at work in the economy,” Putin said.
Other measures included reductions in taxes for small businesses, quicker value-added tax refunds and an increase in monthly unemployment benefits of 1,500 rubles, to 4,900 rubles ($178) next year, items contained in an anti-crisis program he signed two weeks ago.
Let’s compare and contrast. Even without the proposed business tax cut, the top Russian tax rate is currently 24 per cent. The top U.S. rate is currently 35 per cent with state taxes tacked on. If Old Snake Eyes gets his wish, Russia’s top corporate rate will drop to 20 per cent by January.
Let do some more comparing and contrasting. Charlie Rangel has recently revised a proposal he floated last year to cut the top corporate rate and ‘pay for it’ with hits (among others ) to private equity managers and a fine (no other word for it) on married couples whose income exceeds $200,000 with increased cap gains to boot.
Now Rangel is boasting of the ‘mother of all tax reform’, a part of which is a reduction of the top tax corporate rate from 35 to 28 per cent. But again, it’s a mix bag. Via Bloomberg this week:
Rangel, 78, said the reduction would be achieved by targeting special-interest provisions that favor some industries and companies over others.
“We can dramatically cut corporate taxes by cutting out the fat out of those industries that have taken an unfair advantage of the tax code,” Rangel said.
As to rest of it – to the extent we know – it sounds very much like last year’s proposal with dead aim taken at incentives like the research tax credit and deductions for producing products domestically.
When a guy like Charlie Rangel refers to ‘unfair advantage’ taken by ‘industries’, it makes by antennae tingle – not to mention giving me hives. Compare his proposal to Putin’s common sense observation:
‘All this money will remain at work in the economy.’
And who said Putin was such a bad guy?
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