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IMF: US Should Cut Corporate Taxes

December 29, 2008 RSS Feed Print

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This from a new IMF study on how countries should boster their economies. This bit got my attention:

Reduction in corporate tax rates, dividends and capital gains taxes or introduction of special incentives such as accelerated depreciation … are likely to be ineffective given that business profits and capital gains are low, except possibly in countries with very high corporate rates (e.g., Japan); like all such tax changes, they are often difficult to reverse.

Me: Gosh, are there any other countries that immediately pop to mind that have high corporate tax rates? How about the country right behind Japan? That would be U.S., brother.

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These should have been cut as part of the first Bush Tax Cuts. In fact, if I was compelled to chose, I would have cut them before cutting the highest personal income bracket. The IMF has a rather rancid history of making broad generalizations about micro-issues when writing about any country, in this case the United States. They recommend (or force) policy on countries based on the in-vogue macro economic models not on what goes on within the country. The particular model they are using now seems to oversimplify and incorrectly hold the dynamics of business investment constant unless an exogenous event like more government spending triggers more. I don't buy this one bit. "Corporate" rate cuts include cuts for many small businesses not just big businesses. Small business entrepreneurship is the source of innovation in this economy and will ultimately be what triggers our next great economic expansion - despite the desire of some to stifle our economy using oversimplified models.

Joe C. of VA 6:37AM December 30, 2008

IMF: US Should Cut Corporate Taxes

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