“The odds are very high that this will boost growth…” Michael Boskin, @HooverInst @Larry_Kudlow

Dec 06, 04:09 AM
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12-05-2017

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“The odds are very high that this will boost growth…” Michael Boskin, @HooverInst @Larry_Kudlow

Reducing Corporate Tax Rates, as Proposed, Will Increase Economic Activity

While the overall House and Senate tax plans contain numerous household and business provisions, we focus on the corporate tax changes, returning to other provisions before concluding. A key concept in this context is the “user cost of capital,” which essentially measures the expected cost to firms of making additional investments in equipment. A considerable body of economic research concludes that reductions in the user cost of capital raise output in the short and long run. Several of the proposals that have emerged in the current debate are key to lowering the user cost of capital. For example, expensing, which allows firms to deduct the full cost of investment at the time it is made, lowers the user cost of capital relative to depreciation over time. A lower corporate tax rate also lowers the user cost of capital, which not only induces U.S. firms to invest more, but also makes it more attractive for both U.S. and foreign multinational corporations to locate investment in the United States.

https://www.wsj.com/articles/how-tax-reform-will-lift-the-economy-1511729894

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