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Stimulate Growth By Cutting the Corporate Tax Rate

17123254699_c2f412c9ee_qBy Arthur Laffer, Larry Kudlow, and Stephen Moore

From the OC Register:

Everyone’s blaming the collapse of oil prices and China’s sliding economy for the rout in the stock market to start 2016. That’s part of the story, but there may also be a policy explanation for the selloff.

Call it the “Bernie Sanders effect.” In the most recent Democratic presidential debate, the race was on to see who could raise taxes and punish businesses more. While Hillary Clinton was touting her income tax surcharge on millionaires that could raise income taxes to near 50 percent (and her capital-gains tax hike), Sanders said that a 90 percent tax rate might be too high, but somewhere approaching that number is the target he’d shoot for. Bernie also talks about breaking up the banks, putting Wall Streeters in jail, a single-payer health care plan and adding trillions in new government spending.

Such talk doesn’t inspire investor confidence. Was it just coincidence that polls showing Bernie widening his lead against Hillary in New Hampshire, and even beating several Republicans in a head-to-head competition, were released the same day the stock market took another nose dive?

And, for the umpteenth time: Where is the Republican growth message? The economy clearly is sputtering, with corporate profits and business investment weakening and consumer spending slowing down as well. The GOP runs the House and Senate, but there’s still no sign of a growth package to offer a contrasting vision to that of the Bernie and Hillary show.

If the economy does sink into negative territory this year, the Democrats will surely demand more infrastructure spending, unemployment assistance, job training and a panoply of “stimulus” budget busters that didn’t work in 2009 and won’t work now. The GOP response to this nonsense should be short and sweet: been there. Done that.

What could be done right now to stimulate growth, investment and investor confidence almost immediately? A business tax rate reduction. Pass a rate cut to 15 percent, from 35 percent, with full capital expensing and a 5 percent voluntary repatriation tax on the $2 trillion owned by U.S. multinational firms and parked abroad to avoid the high corporate tax.

This won’t cost the Treasury much in lost revenue, and, who knows, it may raise money over five years through the money and businesses repatriated back to America. Apple and GE might bring back tens of billions of dollars for assembly plants and research centers.

The current federal corporate tax rate, 35 percent, is the highest of all the nations we compete with. The rest of the world is closer to 25 percent, with some nations, like Ireland, as low as 12.5 percent.

Read More at the OC Register.

Photo Credit: Pictures of Money

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