Pelosi: Second Stimulus Possible

What we need is real economic stimulus that provides structural benefit for long term growth. Corporate tax relief would be the silver bullet that sparks the economy. If corporate taxes were eliminated permanently, the present value of every stock will be higher by 54%. Translate this into the stock market and prices would skyrocket overnight. The wealth effect created would jolt the economy, companies, including banks, would be able to raise capital at much higher prices, businesses would feel more confident about investing for growth, employment would improve and take housing with it. The effect on the stock market could be even greater as investors anticipate a stronger economy, thus creating a vicious circle of improving confidence. According to Congressional Budget Office estimates, corporate income tax will contribute $223 billion of tax revenue in 2009 compared to total revenues of $2.5 billion, less than 10% of our tax base comes from corporations. The cost over the next 11 years would amount to $3.5 trillion in forgone tax revenue. That pales in comparison next the amounts which may be spent on alternative methods in a potentially prolonged recession, not including the forgone income tax revenue and unemployment benefits that will need to be paid. Eliminating corporate income tax would spur long term growth, leading to higher individual taxes in the future, and it would incentivize multi-nationals to repatriate capital back into the country. Corporations serve a vital function in society. They are important conduits in allocating resources and creating jobs. I hope that the corporation bashing that is taking place in Washington can be replaced by cooperation, and sensible solutions that can be sustained for the long term health of our country.

Brian Matuszak, CFA of MI 10:11PM March 11, 2009