Friday, May 4, 2012

High Corporate Taxes equals fewer jobs

Studies were done in the early 1990s that showed lower corporate tax rates were synonymous with economic growth. As corporate tax rates increase, job creating decreases.  Despite this research, the United States continues to have the highest corporate tax rate -- presently at 38.9% to 39.7%, which is the highest of all industrialized nations, according to Kevin A. Hassett, "The Stubborn Tax: Why the U.S. hasn't cut corporate rates, and why it really should," National Review (April 28, 2012)

Hassett writes that democrats are the biggest culprits, with Bill Clinton raising the corporate tax from 39.5% and 38% to the current level.  However, republicans had control of the House and Senate while Bush was President and they didn't feel pressed to to anything about it either.  So blame goes to both republicans and democrats.

What makes this news so significant is that the while U.S. corporate tax rates remain high, other nations -- even liberal nations such as Canada -- have cut their corporate rates.  While these other countries are reaping the benefits of improved job creation, the U.S. is lagging behind.

One of the major reasons for the lack of interest, according to Hassett, is lack of interest among U.S. corporations, particularly big business.  Most of these companies don't care about the high corporate tax because it gets rid of their competition.  Likewise, they can offset the cost of such taxes by setting up factories and selling products in other countries, and thus bypassing the corporate tax.

Lower corporate taxes may have some benefit to corporate America, yet the major benefactors would be american workers.  With lower corporate taxes, more corporations would have an incentive to set up shop in America.  Likewise, large corporations would also have an increased incentive to open more factories right here in America.  Both these would result in more jobs.

Jobs make the economy go around.  So with lower corporate taxes there would thus be more jobs.  It only makes sense, then, that one of the best ways to create jobs, and thus improve our economy, would be to lower corporate income taxes.  This should be one of the main goals of our next President.  

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