Though income tax cuts do not pay for themselves* and are proven to be an inefficient way of stimulating the economy,** business tax cuts are a different matter. To some extent business tax cuts may pay for themselves to a certain point, but there is no proof they will increase investment in corporate plant and equipment, result in more hires, or increase wages.
Currently would be a good test corporate tax cuts because companies are rolling in money. and are buying back stock which shows they don't know what to do with the money they have. Back in 2004, companies were given a tax holiday to repatriate foreign profits to the U/S. and employment actually dropped!*** Most of the money was wasted on buying back stock.. My guess is that the same thing will happen in today's economic climate.
What about small business? The definition of a small business is complicated.**** Many pay at the income tax rate. A tax cut for small businesses might well increase their investment in their companies and is worth a try. Of course only the largest small business would benefit from a maximum rate of 25%.
The GOP plan revealed on Thursday set the pass-through rate [i.e. small buiness and partnerships] at a maximum of 25 percent, but to deal with concerns it could be abused by individuals rather than truly benefit small businesses, the GOP bill includes prohibitions on what kinds of businesses qualify for this tax reduction. The tax reform bill also allows businesses to immediately write off the cost of new equipment, as well as business loan interest.****
* https://www.cnbc.com/2017/11/07/gop-tax-cuts-will-not-pay-for-themselves-add-to-us-debt-fitch-report.html
** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
http://stopcontinentaldrift.blogspot.com/2016/09/tax-cuts-and-economic-stimulation.html
*** http://stopcontinentaldrift.blogspot.com/2017/11/corporate-taxes-cuts-unintended.html
**** https://www.webopedia.com/TERM/S/small_business.html
https://www.cnbc.com/2017/10/23/main-street-to-trump-tax-reforms-needed-to-keep-american-dream-alive.html
Showing posts with label Tax cuts. Show all posts
Showing posts with label Tax cuts. Show all posts
Saturday, November 11, 2017
Friday, April 28, 2017
TAX PLAN BALONEY
Once again with Trump's tax cuts,* we have the Republican myth that tax cuts more than pay for themselves.** Years ago, I explained why this is not so. But for openers how about why then not cut taxes to zero and have infinite money? Baloney, yes, but that is what is claimed.
There are those who say that tax cuts pay for one-third of their cost. Well maybe. But often economic benefits of tax cuts (e.g. successful new startups), such as they are, come years into the future and do little now.
Business tax cuts may be something else. One analysis concludes that a decrease of the business tax cut from 35% to 22% would pay for itself (But taxes paid vary widely. Currently average companies pay around 28% so this would mean the average company would pay about 15%). But Trump wants to cut it to 15% for an effective tax rate of around 8%.
Few companies pay the full tax rate:
But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.***
.............................................................................
Not all American companies are willing or able to reduce their taxes drastically. Taxes vary more by industry here than abroad, according to a study released in February by Kevin S. Markle of Dartmouth and Douglas A. Shackelford of the University of North Carolina. At the high end, American retailers paid 31 percent in total income taxes, construction 30 percent and manufacturers 26 percent. Financial services companies paid an average of 20 percent, real estate 19 percent and mining 6 percent.
http://www.cnbc.com/2017/04/26/the-white-house-just-outlined-its-tax-plan-heres-whats-in-it.html
** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
http://stopcontinentaldrift.blogspot.com/2010/07/trouble-with-income-tax-cuts.html
http://stopcontinentaldrift.blogspot.com/2012/06/lowering-tax-myth.html
*** http://www.nytimes.com/2011/05/03/business/economy/03rates.html
There are those who say that tax cuts pay for one-third of their cost. Well maybe. But often economic benefits of tax cuts (e.g. successful new startups), such as they are, come years into the future and do little now.
Business tax cuts may be something else. One analysis concludes that a decrease of the business tax cut from 35% to 22% would pay for itself (But taxes paid vary widely. Currently average companies pay around 28% so this would mean the average company would pay about 15%). But Trump wants to cut it to 15% for an effective tax rate of around 8%.
Few companies pay the full tax rate:
But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.***
.............................................................................
Not all American companies are willing or able to reduce their taxes drastically. Taxes vary more by industry here than abroad, according to a study released in February by Kevin S. Markle of Dartmouth and Douglas A. Shackelford of the University of North Carolina. At the high end, American retailers paid 31 percent in total income taxes, construction 30 percent and manufacturers 26 percent. Financial services companies paid an average of 20 percent, real estate 19 percent and mining 6 percent.
http://www.cnbc.com/2017/04/26/the-white-house-just-outlined-its-tax-plan-heres-whats-in-it.html
** http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
http://stopcontinentaldrift.blogspot.com/2010/07/trouble-with-income-tax-cuts.html
http://stopcontinentaldrift.blogspot.com/2012/06/lowering-tax-myth.html
*** http://www.nytimes.com/2011/05/03/business/economy/03rates.html
Thursday, July 22, 2010
THE TROUBLE WITH INCOME TAX CUTS
Also see: http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html earlier from May 2010.
The trouble with income tax cuts are that they are a very inefficient way to stimulate the economy, in spite of what certain people may say. The wealthy buy Treasury bonds and notes and the middle class pay off debt. Although both are admirable, they don't stimulate the economy. The wealthy also buy things that don't stimulate our economy such a purchasing foreign bonds, personal Bombardier jets (Canada), chalets in Switzerland, and islands in the Bahamas (now also islands in Greece) though they may help stimulate the international economy. Yes, there is some investment in new initiatives, but the pay back on those that succeed (and most don't) is rarely immediate and usually takes years. Think of all the years it took Amazon.com to become profitable, for example.
My own suggestion is to let the income taxes expire (just on the wealthy if you prefer) and use some of the revenue to cut corporate income taxes (and let some go for government debt relief). This will make our companies more competitive in exports and, hopefully, cut their prices some domestically. This could lead to more profits stimulating stock prices so that the wealthy could recoup some or all of their income losses.
Slightly modified from post # 63705 in Industry Discussions/ Real Estate Investment Trusts: REITs of Motley Fool
The trouble with income tax cuts are that they are a very inefficient way to stimulate the economy, in spite of what certain people may say. The wealthy buy Treasury bonds and notes and the middle class pay off debt. Although both are admirable, they don't stimulate the economy. The wealthy also buy things that don't stimulate our economy such a purchasing foreign bonds, personal Bombardier jets (Canada), chalets in Switzerland, and islands in the Bahamas (now also islands in Greece) though they may help stimulate the international economy. Yes, there is some investment in new initiatives, but the pay back on those that succeed (and most don't) is rarely immediate and usually takes years. Think of all the years it took Amazon.com to become profitable, for example.
My own suggestion is to let the income taxes expire (just on the wealthy if you prefer) and use some of the revenue to cut corporate income taxes (and let some go for government debt relief). This will make our companies more competitive in exports and, hopefully, cut their prices some domestically. This could lead to more profits stimulating stock prices so that the wealthy could recoup some or all of their income losses.
Slightly modified from post # 63705 in Industry Discussions/ Real Estate Investment Trusts: REITs of Motley Fool
Subscribe to:
Posts (Atom)
