Commonsense tax policies

If we want the U.S. to obtain long-term economic stability and spur economic growth and job creation, we need to cut the corporate capital gains tax, says Representative Scott Garrett, (Republican-N.J.).

Consider other countries:

Some, like Belgium, Hong Kong, Malaysia, New Zealand and Singapore don't tax corporate capital gains.

Others such as Japan and the United Kingdom have exemptions when capital gains are reinvested; even France and Germany passed a 95 per cent exclusion.

Only the United States, Sweden and the Netherlands still tax corporate income at the corporate level and then again at the individual level when shareholders receive dividends.

Further:

The whopping 35 per cent U.S. tax rate creates a "lock-in" effect of investment capital, meaning that corporate taxpayers are less likely to sell appreciated assets because the high-burden tax makes it far from beneficial.

The potential economic value of the assets is never reached, forcing corporate management to borrow on its appreciated assets, creating a higher debt burden for the company and less flexibility overall.

The company's employees bear the burden of this unfortunate alternative and the economy as a whole suffers.

Some estimates put the total amount of locked-in assets at more than $3 trillion; if that figure holds, and if it were all sold and taxed at the individual capital-gains rate of 15 per cent, the government would net $450 billion.

Some analyses indicate that full repeal of corporate capital gains would create annual efficiency gains of $20 billion. But even cutting the rate to the individual rate would yield a great benefit to the economy and is perhaps more politically palatable at this time, explains Garrett.

Source: Scott Garrett, Commonsense tax policies, Washington Times, February 28, 2008.

For text: http://www.washingtontimes.com/article/20080228/EDITORIAL/335578516/1013

For more on Taxes: http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

FMF Policy Bulletin/ 04 March 2008

Publish date: 11 March 2008
Views: 505

Taxation, News

The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.

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