The Big Three automakers came to Washington last week, begging for $25 billion in loans. The Detroit automakers can’t say why they need so much, how they would spend it, or that they won’t be back again, asking for more.

After the bungled handling of the banking bailout, many lawmakers are reluctant to give the automakers what they want. As of now, there’s no deal, but the danger hasn’t passed. Proponents of a bailout argue that without it, the money will instead be spent on unemployment checks and income tax losses when one or more of the Detroit Three file for reorganization under the bankruptcy laws.

So why not just go ahead and do the bailout? Let’s start with a few startling facts:

The United States has the second-highest corporate tax rate in the developed world according to the taxfoundation.org. We’re losing the worldwide tax-rate competition. Eliminating corporate taxes would attract businesses and create jobs.

U.S. businesses spent $148 billion in 2005 complying with a complicated and inefficient tax code. Meanwhile, revenue from the corporate tax was only $272 billion. Some companies spend millions trying to find tax loopholes. This is money that could go to create products, services, and jobs.
In 2008, the combined cost of corporate taxes and tax compliance is likely to be about half a trillion dollars. Why would we impose $500 billion dollars in costs on businesses to raise only about $300 billion in tax revenue and then spend a trillion to prop them up?

We could accomplish a real positive result with dramatic tax changes and allowing companies to declare Chapter 11. These companies would then have the opportunity to restructure into rejuvenated productive businesses while at the same time injecting $500 billion a year back into the economy.
Bankruptcy isn’t the end of the world. Many large businesses, from retailers to airlines to steel companies, have gone bankrupt, but are still in business through reorganization and consolidation. Bankruptcy actually saves many businesses.

The Big Three’s problems are self-inflicted, from signing extravagant union contracts to building gas-guzzling SUVs. Foreign-owned automakers who build cars in the U.S. aren’t facing the same difficulties. So why should taxpayers have to subsidize the incompetence of the Big Three, when reorganization under the bankruptcy laws would allow them to correct their errors at little cost to innocent bystanders?
Eliminating the corporate tax would inject half a trillion dollars a year into the productive economy while lowering the cost of goods and services and cost us taxpayers much less than their boondoggle bailouts.

DAVID L. COX
Grand Junction

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