Quote:
Originally Posted by spence
The front half of your statement doesn't make any sense.
The back half makes some sense but it's more complicated than you state. In capital budgeting the tax rate is just one variable in the calculation. The net return is a factor of investments, anticipated benefits, taxes on profit (income less expenses) as well as the hurdle rate etc...
Dialing the corporate tax rate down isn't going to impact investments as much because if the projects are justified they would typically need to be justified by a wider margin than the difference in tax rates provide.
Small business could be different.
Posted from my iPhone/Mobile device
|
"The front half of your statement doesn't make any sense. "
If a business makes a dollar of income, today they owe Uncle Sam 35 cents. Am I going too fast for you?
"In capital budgeting the tax rate is just one variable in the calculation"
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.