Tax cuts spur American growth

Tommy Tucker, WWL First News
Tuesday, November 14th

Tommy speaks to Alan Viard,Resident Scholar at the American Enterprise Institute, about tax cuts. 


Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

That the company you work for gets a tax cut. Do you think you'll get a raise. So if your business owner. Or if you're a business owner needed tax cut our Egan passes savings on your employees and gamma rays are you know. Funnel that up toward the top and a business owner or in a corporate situation that. They corporation and whatever you do with the money after that Allenby are joins us right now resident scholar at the American Enterprise Institute good morning Allan. Joining Damaso indeed seems to me it's been proffered that. If the tax plan. Passes because. Businesses will be saving money they will be inclined either hire more employees or. Increased paychecks is that accurate. Most economists believe that a corporate rate cut would prove cause some increase in wages all the that a lot of disputes. About the size of the increase I do empathize exactly how that would have your not a question of they like the companies get more money I mean of the company. For example bought a lottery ticket and it happened to pay off you wouldn't expect them to do more investments are more workers. Because he just having that extra lottery money wouldn't it changed the profitability. Those decisions. But what they cutting the corporate rate does is it makes the United States and more attractive location for investment and that's true for both American and foreign companies. And that you would expect companies to. It was a matter of their self interest to increase. Their investment in the United States when they increased investment. Workers would become more productive. And so that would cause the market level their wages to rise to basically companies demand for workers. Would go a lot as they invested in this additional capital so that pretty broad agreement among economists that there would be. Yes some increase in wages but a lot of dispute about the size. So in terms of more productivity housing connection made between Haiti yet again make in 101000 hour now and you pay him or heard twelve dollars an hour. Doing the same thing that a gonna be more productive. It goes the other way around that says the workers would become more productive if they have more capital to work and then as employers try to hire. That did there increased demand for those workers would then push up the wages so we know that the productivity of labor depend heavily on the amount of capital. That's been placed in India there's no capital no factories no equipment no nothing. I would not be very productive nobody would but then if you have those things in place of course that makes workers more productive and certainly as we look at countries over time. It's the combination of technology and capital the other causes workers to become more productive and causes wages to rise to overtime in that link I think it's pretty clear cut. In terms of tax rates in businesses. My CNET. Stated both ways that the United States has the highest tax rate of every country Denon scene with the different deductions in different. Procedures that counting receives a companies can followed that that. Taxer is almost pretty close to 20% now is that true or not. Yet though it it is important to distinguish those two different kind of break our headline rate is 35% of the federal level. And on average another 4% at state level and that is the highest in the developed world it's like the third highest in the in the entire world. And and that rate actually is relevant for some decisions including for example where to book profits that. Which country to book the man but it is true that when you look at investment incentives we really want to focus more on the effective tax rate. That's probably somewhere between twenty and 25%. And by AI but yes but I think are the most reliable it is suggest that we are probably above average. Even on that rate among the developed countries although we're certainly not the very top the way we would be you know if you look at the headline rate. So. We can say you he unequivocally that if the business gets a tax rate that they're gonna. Who put that into there do you returned earnings expansion however you want a phrase it's of that. It will create more jobs which will in turn create more demand relievers which will push. Salaries up to I get that right or not is on my course. Yet that that's about right again the key driver is not that the companies are getting more money. Budget that it becomes more profitable for them to invest in the United States so they're able to keep higher fraction. Of the well I guess but I get it it's not just back they have more money in their pockets doesn't like it they want a lottery or something you know that wouldn't have any of these effects. To that wouldn't change the profitability of Wear and now. One thing I'm confused about his like I was watching Neil Cavuto last night about Amazon and mall mart and online shopping and so forth in that. The differences numb did business philosophies above market share. And process. Right so. Some companies when increased market share and not necessarily looking at profit explain it to me. Well I'm not I'm not try canned because I think that it seems like a pretty safe assumption to me the visitors are concerned about profits. I mean it's possible that as to the business today. In order to obtain long run profit try to increase their market share today even if it's not bringing in the short run profits but. I have to think that the ultimate goal is always going to be profits. I was thinks it's hard for me to imagine anything else doesn't confuse because it's like you there and and Alan. People I'm sorry that's like people are in business at some ideas right. Dad dad that it just seems to me that there couldn't be any real dispute about that. And tell it like today you know anything about the corporate rate cut you know we have to assume that. That if it becomes more profitable and that the United States and businesses. Being interested in profits you know will do more of that so summonses some of the games recovery time will go to two workers. Of course tumble also goes to. To shareholders of companies so. There is a division of gains between them.