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Tuesday, October 14, 2008

The Case for Corporate Tax Cuts

The NCPA has a short primer on why the US (and Pennsylvania) should cut corporate tax rates.

  1. The US has the 2nd highest (to Japan) combined corporate tax rate.  Pennsylvania's rate (with a 9.99% state tax rate) exceeds Japan and only trails Iowa as the highest rate in the world.
  2. High corporate taxes result in less investment (i.e. the "outsourcing of jobs"), especially as other countries are cutting corporate tax rates.
  3. High corporate taxes result in lower wages.  Corporations don't pay taxes, only people do - most of the burden of corporate taxes is born by workers.
  4. High corporate taxes result in lower tax revenue. This is part of the dynamic effect of tax rates.  While the Laffer Curve implies that most tax cuts (at current rates) would result in some feedback tax revenue, they would not "pay for themselves."  However, punitive corporate tax rates fall on the other side of the Laffer Curve, based on the experience of other countries that slashed rates and got more revenue.

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