Incremental Reform

I don’t think we even need to go as far as Larry Kudlow advises in his post at RealClearPolitics:

Thankfully, there’s a way out of this mess. Let the Fed keep interest rates and the dollar stable. No more tightening. Meanwhile, the Republican Congress can pass a significant tax cut for large and small businesses. Push the rate down to 15 percent for C-corps and S-corps. Provide easy repatriation of U.S. money overseas. And permit immediate tax write-offs for new-business-investment expenses.

Congress could also push for reduced regulatory burdens, although it looks like there’s no stopping the Obama administration’s unconstitutional march toward even greater regulations.

But a big business tax cut would be the most stimulative way to move the economy from near recession to 4 or 5 percent growth. That’s what we need. Put it together with a stable and reliable dollar, and we can move from pessimism to optimism.

While I presume I agree with Mr. Kudlow that the optimal business income tax is zero, I don’t see any way that will pass the Senate but here’s something that might. Bring our corporate income tax laws into line with the rest of the OECD countries. Reduce our rate to a level just below Germany’s 15% and stop taxing overseas earnings.

7 comments… add one
  • Guarneri Link

    Yes, I suspect that is the only tax policy initiative that falls into the bucket of doable.

  • steve Link

    We really should push for a 0% corporate tax. I am quite skeptical that it would cause significant GDP growth, and if it did, it would all go to the top anyway (when did a tax cut proposed by a conservative do anything else) and we would still be unlikely to see wage or job growth. The real reason is that corporate taxes are such a source of corruption. They are also a source of corporate deadweight loss with so much money being spent upon tax avoidance. It would have the wonderful result of putting lots of tax lawyers out of work and a whole bunch of VC guys who mostly make their money by helping companies avoid taxes. Now is a good time to push for this since corporate taxes no longer provide such a large portion of federal revenue as they did in the past.


  • mike shupp Link

    One of these days, I’d really like some pundit to explain exactly is meant by “the regulatory burden” — pointing to specific laws and pages of regulations to make his case. And I’d like to see some plausible scheme acceptable to both parties for reducing the number of laws and regulations that affect business and all the rest of us, and even some choice of persons who will begin to whittle down all those pages of burdensome laws.

    Because I’ve been hearing about Burdensome Regulation Yadda Yadda for over 50 years now, and it NEVER gets more defined than “Burdensome Yadda Yadda Yadda”. And after 50 years, I’m finding this a bit tiresome. It starts to make me think that complaints about Burdensome Regulation are simply meaningless conservative bull shit.

  • Guarneri Link

    Thats a fascinating claim, steve, given that for the majority of the period that a VC is involved a company has little to no internal cash flow, much less pre-tax earnings.

  • steve Link

    But there’s that 100% exclusion at the end of the rainbow.


  • Guarneri Link

    There are no 100% exclusions, steve. Further, tax management is decidedly not how either early or late stage PE makes it’s money in the life cycle of entry and exit of a corporate asset.

  • ... Link

    Larry Kudlow in favor of a tax cut. How novel!

    And does he really think 4 and 5 percent GDP growth can be attained in the USA on a regular basis? That’s a bounce from the old style recessions, not the new ones, and it’s just a bounce.

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