How Lower Corporate Tax Rates Would Spur Economic Growth And Reduce Unemployment – Article Example

How Lower Corporate Tax Rates Would Spur Economic Growth and Reduce Unemployment How Lower Corporate Tax Rates Would Spur EconomicGrowth and Reduce Unemployment
Issue; Higher corporate taxes through increase in dividend tax and capital gain tax had a depressing effect on the Unites states economy. Reducing corporate taxes would spur economic growth, reduce unemployment, and encourage more corporations to invest.
Reasons; Corporation taxes are paid by the owners or investors of the corporations together with the corporations. A higher dividend tax and capital gain tax affects the investor in a negative way due to the element of double taxation. The company pays tax with its profits then pays dividends that are also taxed and if one buys shares in these corporations, they are taxed again due to the capital gain tax. Fiscal cliff agreement increases the tax on the dividends and capital gains have a negative impact on the investments’ to the corporations. Although this was done to the high-income earners, the whole economy experienced a depression ( Ilhan et al)
Economic requirements; income tax has to be decreased to balance the increase in capital gain tax and dividend tax. Offsetting the income tax to a larger margin than the tax increase on the investors would have a more positive effect on the stock market since share prices would raise. If the reduction in income tax were not accompanied by increase in other investment taxes then more growth would be registered (Ilhan et al).
Rationale; If income taxes are reduced corporations would retain more of its earnings and invest in other projects that would create employment. Low capital gain taxes and dividend tax would ensure that the rich invest in more projects that would increase spending and create more jobs. It would also make stock market prices raise and more people would invest in the market, which is an indicator of how the economy is performing.
Conclusion. Low income taxes, dividend taxes capital gain taxes would lead to a growth in the economy, employment and encourage more investments.
Reference
Ilhan M, IraB. Sprotzer, and Gulser Meric; (2013) How Lower Corporate Tax Rates would Spur Economic Growth and Reduce Unemployment. Journal of Taxation and Investments. Rider University.