Ryan Bourne: Corporate Tax Cut will Help Workers and Shareholders

In case you missed it over the weekend, Cato scholarRyan Bourne wrote about the Republican tax reform plan in an op-ed featured inThe Hill. He responds to the argument that corporations will use money saved from the reduction in the federal corporate tax rate to increase dividends, buy back shares, or other strategies that benefit their shareholders.  Major companies, including Cisco Systems, Pfizer and Coca-Cola, have said they will use most of the gains from proposed corporate rate cuts  to increase dividends to shareholders or buy back their own shares.  This has been reported and shared on Twitter as a slam dunk against the Republican tax plan.After all, a major claim of the administration has been that corporate rate cuts would benefit workers through wage rises, rather than flowing exclusively to capital owners.Yet, the reaction of these companies is nothing unexpected, at least in the short term. Any substantial cut to the corporate rate provides an immediate windfall to so-called “old capital.”But even though the initial beneficiaries of changes in the corporate tax rate will indeed be corporate shareholders, Bourne points out that those savings have to go somewhere.  If existing firms have excess capital in the short-term, distributing it to shareholders in some way makes sense. This money is unlikely to sit dormant afterwards. In all likelihood, that money will be deployed elsewhere to find new value.The market for growth industries through venture capital a...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs