Broker Check

March 2016 - Corporate Tax Rates

What follows is from a speech on March 1, 2016 at the University of Chicago Booth School of Business by Larry Summers, Harvard economist and former U.S. Treasury Secretary during Bill Clinton's administration:

"With respect to private investment, tax reform is critical. Permit me an analogy here. Imagine that you are running a library and that there is a substantial volume of overdue books. You might offer amnesty to get people to return the books. You might announce you will never offer amnesty, so people will take fines seriously and return the books. Only an idiot would put a sign on the door saying, "No amnesty now, but we're thinking hard about amnesty for next month."

You laugh, but American corporations have $2 trillion-plus overseas. If they bring that cash back right now they pay 35%. If you've picked up any newspaper in the last seven years, you'll know that Congress has been actively debating changes to that policy-- for seven years. Just like the sign on the door of the library saying they're thinking about amnesty for next month. It would be hard to conceive a policy better designed to keep that cash outside the U.S. and not invested in the U.S. than the policy we have pursued. That's why I stress business tax reform as important for economic growth."

How refreshing to hear a compelling argument for reducing corporate tax rates from a Democratic stalwart. It is a healthy reminder we must look past political rhetoric that gets spewed during crazy election cycles and focus on policies that will lead to a desired result. In this case, repatriation of $2 trillion dollars would seriously boost tax revenue for the next administration AND contribute to massive reinvestment that should boost U.S. employment and wages!

The views expressed are those of Lindsey Randolph and should not be construed as investment advice. All economic information is historical and not indicative of future results. All information is believed to be from reliable sources; however, we make no representations as to its completeness or accuracy. Discuss all information with your advisor prior to implementation.

Have a Question?

Thank you!