http://www.nytimes.com/2012/02/22/business/economy/obama-offers-to-cut-corporate-tax-rate-to-28.html
This article is about Obama and Geithner's plan to lower the corporate tax rate in the United States. Aside from this being a blatant political move to preemptively counter Republican rhetoric on Obama being a socialist who raises taxes, I think this move could yield positive results. The idea is to lower manufacturing corporations tax rates from 35% to 25% and non-manufacturing corporations down to 28%. The idea is to simplify the code and fill in existing loop holes in the system. Studies have found that over 20% of S&P index companies paid 20% tax rates because of loop holes and claiming profits outside of the U.S. The changes should increase competitiveness of the current and potential future manufacturers in the U.S. as we already have the highest corporate tax rate in the developed world.
I am not sure if this move will bring in more revenue (if that is the goal) as it claims. The thing about these corporations is they hire the best accountants to find the tax holes. That's why we are addressing this issue today. Hopefully corporations (especially the extremely profitable ones) will take a morality high ground and pay their legal part.
5 comments:
It's not a blatantly political move. Large companies like lower tax rates. You even said it yourself. (Also, Republicans can suck it. Their last three presidents all raised taxes overall-Bush Jr. Bush Sr. and their God Reagan)
The move is designed to keep the United States competitive and bring some stability to our tax code. The lack of stability in the US tax code is a large deterrent for investors.
From what I understand, I think that another part of the intention to lower tax rates, especially manufacturing corporation tax rates, was to discourage the outsourcing of jobs. By paying a lower tax rate, they may be less inclined to cut costs by shipping jobs overseas (thus paying less) overall, and keeping jobs in the US. I also remember from the SOU address Obama delivered that he was going to give manufacturing corporations tax breaks and subsidize them if they kept jobs here and even relocated to struggling cities like Detroit to open up plants and help rejuvenate that city. Correct me if I'm wrong.
This is a great means to try to allow the business sector to rebound, especially in regards to the desire for new jobs to be filled. This in combination with the positive signs of the housing market could be exactly what is needed to bring the economy back.
To be honest, I was a little surprised at the first glance. Nevertheless, to lower the tax rates for the manufacture and business sectors might be a means to stimulate the economy. In addition, as implied in the article, it might also a way to mitigate Republican rhetoric on Obama being concerning (too much) on raising taxes (of the rich). Moreover, an important benefit of lowering the tax, as stated in the article, is to simplify the tax code and fill in existing loop holes in the system. As expected, the changes will increase competitiveness of the current and potential future manufacturers in the U.S. Therefore, at the stage of recovering, this tax policy might incent manufacturers and companies and therefore improve the economy.
I agree that this political move of raising taxes at this point could bring some reputation from the investors in the coming presidential election. But how effective and exact the standard could get attained is still unknown.
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