The Tax Cut That Would Be the Most Expansionary. President Trump has been promising a big, beautiful tax cut for years now. But the one tax cut that would be the most expansionary is not necessarily what you think it is.
A recent study by economists Kyle Herkenhoff and Lee Ohanian found that cutting corporate taxes from 35% to 25% would have four times as much of an impact on gross domestic product (GDP) growth than lowering individual rates from 39.6% to 33%. The reason for this discrepancy?
Fixing our uncompetitive business tax rate will make America more attractive to foreign investment and increase incentives for U.S. companies to invest at home rather than abroad, which will generate more American jobs. Cutting individual tax rates is a good idea, but the most pro-growth move would be to cut corporate taxes.
In addition to having more policy bang for their buck, cuts in business taxation have two other important advantages over reductions in income and estate taxes. They cannot be avoided by clever taxpayers as capital gains can, and they will not trigger major increases in federal debt because the revenues are raised from corporations rather than individuals or estates.
What’s missing? This blog post needs content about why lowering property taxes (or cutting them) might also help economic growth… Do you want to add that sentence? Let us know! “