January 11, 2008
Cutting corporate tax rate better stimulus for workers, economy
For more information, contact: Bill Ahern at (202) 464-5101.
WASHINGTON, January 10, 2007 — As presidential candidate Hillary Clinton unveils her fiscal economic stimulus package today, and talk of packages from Congress and the president continues to circulate, the Tax Foundation released its outlook on the best ways to shore up the economy and promote long-term growth. The proposal frowns on short-term fiscal stimulus in favor of a long-term solution: lowering the corporate tax rate, currently the second highest in the industrialized world.
"While a stimulus package might be politically popular as extraneous spending and tax provisions are added to it," said Dr. Robert Carroll, Tax Foundation vice president for economic policy, "stimulus packages are often ill-timed, poorly-crafted, and do little to boost the economy. Sound monetary policy should be used in the short run to help stabilize the economy."
In his report, Tax Foundation Fiscal Fact No. 115, Dr. Carroll discusses some of the problems with fiscal stimulus , such as a temporary tax cuts or an expansion of government spending. He points out that such proposals might in the end have a negligible impact on the economy, and perhaps worse yet, be a distraction from the more fundamental problems facing our economy.
"Shoring up the economy is important, but our attention also should be focused on the problems our economy faces in the longer term," Carroll continued. "Reevaluating our business tax system in the context of global competitiveness is an issue important to American workers and living standards. A wave of corporate tax rate cuts has swept across Europe and Asia , leaving the U.S. behind. Our business tax system is becoming outdated and the United States may be losing ground to its major competitors. A decade and a half ago the U.S. was a low-tax rate country, but that's no longer the case. The reality is that the United States now has the second highest corporate tax rate in the industrialized world."
Added Scott Hodge, Tax Foundation President: "Our high corporate tax rate will continue to bog the American economy down if real and significant action isn't taken. Addressing that structural problem is the best way to help American workers and our economy for years to come. If we really want to help American workers and our economy, now is the time to act."
The full report is available online at: http://www.taxfoundation.org/publications/show/22859.html
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The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day®, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.