Wednesday, February 22, 2017

CORPORATE TAX RATES AND BANK BUSINESS LOANING

Though the stated corporate tax rate is 35%, few companies pay the whole rate.  I believe the average is more around 26%, but many companies paid no Federal tax in 2012, for example, because of loss carryovers resulting from the Great Recession.*  I don't know how much Federal revenue would be lost if the corporate tax rate was reduced to 15% as many companies pay about that now. Even now, corporations pay only 11% of the Federal taxes and 4% of the state.*

Barron's, however, recommends a tax rate of 22% which they feel is enough to be counteracted by increased business to make a revenue neutral sum.  This would probably lower the effective tax rate to 15-18%.

Trump seems to appreciate all of that. On the campaign trail, he proposed slashing the rate that businesses pay on income from 35% to 15%. That might be too much—it could significantly reduce the government’s tax haul and add to the nation’s already unacceptable debt burden. Barron’s recommends a cut to 22%, which would be revenue-neutral, allowing businesses to produce just enough additional taxable income to offset the effect of the lower rate. And getting a 22% cut through Congress would be easier than 15%.**

Janet Yellen refutes claims that banks are not lending:
However, Yellen mentioned a recent survey from the National Federal of Independent Business, in which only 2 percent of respondents cited access to capital as their greatest obstacle. "Lending has expanded overall by the banking system, and also to small businesses," she said.
Brown also asked how U.S. banks are doing compared with their global competitors.
"U.S. banks are generally considered quite strong relative to their counterparts [in other countries]," Yellen responded. "They've built up quite a bit of capital, partly as a results of our insistence that they do so." ***

* http://www.justfacts.com/taxes.asp
http://www.gao.gov/products/GAO-16-363
** http://www.barrons.com/articles/cut-the-top-u-s-corporate-tax-rate-to-22-1480137247
http://www.forbes.com/2011/04/13/ge-exxon-walmart-apple-business-washington-corporate-taxes.html
*** http://www.cnbc.com/2017/02/14/janet-yellen-banks-are-lending-and-quite-profitable.html
http://www.nfib.com/surveys/small-business-economic-trends/

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