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Let’s say you have 39% of your income taken from you by the government. Would you be able to hire more people? Would you be able to invest more? If you’re taxed more, you will spend less; this is common sense really. America has the second highest corporate income tax rates on earth (up to 39%). What is the problem with a higher tax rate on business? Well, this is simple economics actually. Businesses will either run away from America or they will increase prices and employ less people.

But why would prices go up? Simple really; when corporate income tax rates go up, two things happen. The industry which supplies businesses will have to increase their prices to make a profit – thus leading to an increase in production costs for other businesses. To keep up with demand, business will have to produce more and hire more. But with a higher cost of production comes higher prices for goods and services. With the higher tax rate, it will also be more costly to employ more people, thus leading to even higher prices for goods and services. The result is a slowdown in economic growth and output. Even if demand is high, a higher tax burden will not give us the maximum growth we seek. We can easily fix this problem by lowering corporate income tax rates.

There are two main reasons for why we should want lower corporate income tax rates. The first reason is because a lower corporate income tax rate means that prices will be lower, thus increasing demand via price adjustments. If a company sells a product for a lower price, consumers will have more incentive to buy because it is cheaper for them to do so. This is just common sense economics. The second reason for lowering corporate income taxes is because a lower tax rate allows business to employ more. This way, if demand is high, businesses can take full advantage of this because the price of production will be less. This will allow them to lower prices, produce more, and hire more employees to keep up with the higher demand. What does this all lead to? A higher standard of living is the end result. It will be cheaper for people to buy products and at the same time more people will be employed. Or in simple terms, the standard of living will increase because of a lower corporate income tax rate.

Does this mean there will be no recessions? Of course not, recessions are natural to the free market. A recession comes about after a boom or peak in output. We call this the business cycle. To get out of that recession, you lower taxes. After the recession, you can raise the tax rate back to the original tax rate.

Will lowering the corporate income tax rate increase the deficit? If it does, it won’t increase it by much. In 2008, the government received $2,523.6 Trillion dollars in revenues. Out of that $2,523.6 Trillion dollars, only $304.3 Billion came from Corporate Income Taxes. So statistically speaking, we get 12% of our national revenues from corporate income taxes. In retrospect, Personal Income Taxes account for more than 45% of our total revenues. So if we did lower the corporate income tax rate, the deficit would not increase by much.

Another argument could be made for lowering corporate income taxes. If tax rates are lower, the incentive to open new businesses will increase. That is because the cost of maintaining a business will be lower. That will allow more small businesses to open up. This can actually lead to more revenues. If you have a tax rate of 35% for 1000 businesses, you will get some revenue. But we all know that 25% of 1500 businesses is greater than 35% of 1000. So in theory, you could actually increase revenues. In real life, this has actually happened. Under President John Fitzgerald Kennedy, corporate income taxes were lowered from 52% to 48%. The result was an increase in revenues…

Overall, I come to the conclusion that lowering corporate income taxes will defiantly help business in America prosper. In Germany, corporate income taxes have been lowered and the result is that business is not only doing great, but businesses all over Europe are flocking towards Germany! So I hope you can see the reason for why lowering corporate income taxes is critical to the success of American business in our near future…

Before you read the sources, I personaly challenge someone to prove me wrong...

Sources: My Blog: http://albertsamerica.wordpress.com/

Government Records:

http://www.bls.gov/cps/prev_yrs.htm Unemployment 1950s to now.

http://www.whitehouse.gov/omb/budget/fy2009/pdf/hist.pdf Deficits/Revenues/Surpluses/budget

http://www.bea.gov/scb/pdf/2008/08%20August/0808_gdp_nipas.pdf GDP Growth 40s – Present

http://www.cbo.gov/ftpdocs/100xx/doc10014/March2009_HistoricalTables.pdf Revenues, Deficits, Budget 1965-2008