Quote:
Originally Posted by Jim in CT
If a business makes a dollar of income, today they owe Uncle Sam 35 cents. Am I going too fast for you?
|
Your wit is dizzying.
Quote:
|
Agreed. But the cost associated with that one variable, is set to decrease significantly. So all other things being equal, when doing a cost/benefit analysis, the cost is going to decrease. Which makes investments look more attractive. This cannot fail to occur.
|
In simple terms, if you were to make a 10m capital investment that hoped to net 1.5m in profit, the proposed difference in marginal corporate taxes would be 2.25% of the total investment. That's not usually going to big enough to sway an investment decision given much larger factors. One reason is that the capital investment is risk adjusted using a hurdle rate which could be 19%. What kind of a return would you get if you just invested that 10m into bonds? This is usually subtracted and make the tax savings even less significant.
Note that the 35% rate is misleading. The effective average rate is closer to 20%...buy maintaining deductions that's even going to go way down which is why the deficit will explode.
The bottom line is that investment ideas are either good or bad. A good idea isn't going to be shelved because of a few percentage points...most companies either have the cash or can leverage given the low interest rates.