(no subject)
Oct. 22nd, 2017 03:07 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
timeletsSummers on the debate around the proposed corporate tax cut:
This is a non-intuitive point that most people don't understand. The most likely outcome of the reform, besides an increase in budget deficits, will be an increase in aftertax corporate profits that flow to shareholders and managers through dividends and buyback programs.
First, a cut in the corporate tax rate from 35 to 20 percent in the presence of expensing of substantial or total investment has very little impact on the incentive to invest. Imagine the case of full expensing. If a company is permitted to deduct all of its investment costs and then is taxed on all of its investment profits, the tax rate has no impact at all on the investment incentive.
https://www.washingtonpost.com/news/wonk/wp/2017/10/22/lawrence-summers-one-last-time-on-who-benefits-from-corporate-tax-cuts/
This is a non-intuitive point that most people don't understand. The most likely outcome of the reform, besides an increase in budget deficits, will be an increase in aftertax corporate profits that flow to shareholders and managers through dividends and buyback programs.
