“As any businessman who has actually run a business knows, higher business tax rates encourage higher investment and lower business tax rates encourage lower business investment.
The reason for this is very simple. If tax rates are low, a business can take profits out of the company with little pain. When tax rates are high, the best way to keep your money is to invest it in the company. Invested money is tax free as an expense deduction. On the other hand, profits taken out of the company are taxed.
So when corporate taxes were 50%, the owner could take profits and give half of it to the government. Or the owner could invest the money in new equipment, new employees or new research to grow their company and keep 100% of it. Which would you rather do?
The choice is clear. When taxes rates are high, investment it likely to be high in order to avoid paying taxes. When tax rates are low, investment is likely to be low as owners pull cash out of the company.
This notion that lower tax rates encourage investment is exactly contrary to reality. It is a convenient lie that businessmen who know better sell to gullible non-businessmen because it sounds good.” By BillB