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Friday, November 17, 2017

Tax cut: Only corporate taxes matter

House passage of the tax cut on Thursday was good news. No one is sure if the Senate will pass one, and whether the House will go along with it.

While the discussion will center on the peripherals of child care tax credits and the like, the only thing that will bring about 5% annual growth is a cut in the corporate tax rate.

U.S. corporate taxes redline.

The 35% rate is way too high. Even NPR says it is the highest in the world.

Dropping it to a more rational 20% will put the United States rate below Cuba, Kenya, Mexico, and many other such countries.

President Trump earned credit for the stock rise and drop in unemployment because he is cutting the regulations and the red tape.

The War on Coal is over. Liberals lie when they say there was no war because they have used every trick in the book to end coal mining in the United States for a half-century. This has nothing to do with the environment, and everything to do with crippling our economy.

But rolling back regulations and approving pipelines are only one part of the plan to Make America Great Again.

Getting corporate investment to return to the United States is a more important part.

And you do that by increasing the return on investment in the United States.

Dropping corporate tax rates does that. It allows corporations to keep more of the money they earn.

China is at 25%.

Canada is at 26.8%.

Mexico is at 30%.

We are at 38.92% when state corporate taxes are added.

Other countries really don't matter as much, as those three are our top trading partners. They account for nearly half our exports and imports. Japan is a distant fourth. Its rate is 32%.

So how does that work?

In order to keep $75 million, you must generate $100 million in pretax profit in China.

In the United States, you must generate $123 million.

Cutting the corporate tax rate will give us the greatest benefit and likely will increase corporate tax revenues over time.

But the real measure will be in investments.

Barack Obama had that $837 billion stimulus that did not do jack. It cost taxpayers $837 billion.

China and Japan agreed to invest $350 billion in the country under President Trump. That will cost taxpayers $0. Actually, less than zero as they will pay taxes on the goods and services that money buys.

Their investments will produce jobs.

Dropping the corporate tax rate will increase investments.

Personal income tax "reform" is nice but that is the parsley and sour cream. I'm not opposed to it, but it is not like we are dropping from 70% down to 50% in the top bracket.

The meat and potatoes are the corporate tax cut.

Congress will sweat the little stuff. But keep the eye on the prize: the corporate tax cut. Drop it to 20%, and watch the economy soar.


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  1. Corporations don't pay taxes; their customers do. Corporations then pass those on to the government. They are only the middle man.

    1. And the shareholders

    2. So we customers will have less to contribute to corporate taxes.

  2. I wonder if that $837-billion is still "baked" into the Federal Budget?

  3. Since Dimocrats are rat bastard commies they hate private enterprise. They want to destroy businesses so they can take them over. Their model is Venezuela. - GOC

  4. Nailed it, Don. I commented the same thought on Instapundit (though not as eloquently) yesterday and today.

  5. The top tax rate might be 35%, but how many companies actually pay that rate? I'd venture a guess not many, and that most of them pay an effective tax rate that is far, far less. Apple, for example, is surely not paying anything close to 35%, even when you add in state and local taxes.

    1. Well, if not many companies are paying it anyway, that would seem to be another argument for cutting it.

      You're not really losing anything.

    2. I agree. But those who are expecting a huge economic bounce from passage of the proposed tax cut may be disappointed. The EXPECTATION and widespread talk of one, i.e., the psychological effect stemming from a more business friendly administration, has probably already been built into the huge bull market we've seen since last November. I wouldn't expect the effects of an actual tax cut (as opposed to talk of one) to drive the stock market all that much higher unless there's first a moderate correction, say, in the first quarter of next year. Just spitballing here, you know.

  6. The one thing besides the corporate tax that I would like to see is getting rid of the state income tax reduction that allows places like California to over tax and spend and the federal government (meaning every other state) gets no say in it but must cover whatever California spends (with the deduction).

    1. Agreed. The federal tax deduction for state and local taxes only benefits the upper incomes who can itemize their return. Us deplorables that can only take the standard deduction are getting ripped off and subsidizing the upper incomes. - Elric

  7. Well, Big D, I just looked out my window and didn't see any pigs flying, so I would say those cucksockers in the Senate won't do fuck all on this bill...