Thursday, January 17, 2008


Today in Columbia, South Carolina, John McCain unveiled his plan to stimulate the American economy. McCain's plan will lower the corporate tax rate, allow expensing of equipment and technology investments and establish a permanent research and development tax credit.

"Now is the time to act to stimulate our economy," said John McCain. "I offer a genuinely conservative, pro-growth plan to provide much-needed stimulus to our economy, creating more prosperity and opportunity for American families. Unlike the Democrats' tired ideas of tax and spend, my plan will cut taxes, spur investment and innovation and make American business more competitive in the global marketplace."

Jack Kemp applauded John McCain's economic stimulus initiative, stating, "John McCain's pro-growth stimulus plan is exactly what our economy needs today. As president, John McCain will provide principled leadership to ensure our economy remains the envy of the free world."


· Cut The Corporate Tax Rate From 35 To 25 Percent.

A lower corporate tax rate is essential to U.S. competitiveness. America was once a low-tax business environment, but as our trade partners lowered their rates, America failed to keep pace, leaving us with the second-highest rate among the world's advanced economies.[1]

Cutting the corporate tax will expand the U.S. economy, creating jobs and opportunities for prosperity. A recent analysis of tax policy options estimated that a cut less than half this size could increase long-term growth by 0.5 percent, or $100 billion in a single year.[2]

Lower corporate taxes leads to higher wages. Recent studies have shown that corporate taxes are in large part passed on to labor through lower wages. One study noted that a one percent hike in the corporate tax results in a 0.8 percent decrease in manufacturing wages.[3] Accordingly, cutting corporate taxes can increase wages for American workers.

· Allow First-Year Deduction, Or "Expensing", Of Equipment And Technology Investments.
Expensing of equipment and technology will provide an immediate boost to capital expenditures and reward investments in cutting-edge technologies.

The additional investment stimulated by a change to expensing of equipment and technology will drive to economic growth. A recent estimate of a modest expensing provision predicted a gain of 1.5 percent in long term economic growth.[4]

The complexity of our tax code needlessly burdens American businesses and families with $140 billion in compliance costs.[5] Allowing expensing will eliminate the need for complicated accounting for depreciation.

· Establish Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D.

The R&D tax credit will simplify the tax code, reward activity in the United States, and make us more competitive with other countries.

A permanent credit will provide an incentive to innovate and remove uncertainty. At a time when our companies need to be more competitive, we need to provide a permanent incentive to innovate, and remove the uncertainty now hanging over businesses as they make R&D investment decisions.

· These Are Essential First Steps On The Path To Fundamental Tax Reform, Which Could Increase U.S. GDP By As Much As 10 Percent Over The Long Term.[6]

[1] Robert Carroll, "Fiscal Stimulus: Missing The Big Picture?" The Tax Foundation, January 11, 2008
[2] U.S. Department of the Treasury, "Approaches to Reform the U.S. Business Tax System for the 21st Century," December 20, 2007
[3] Kevin Hassett and Aparna Mathur, "Taxes and Wages," American Enterprise Institute for Public Policy Research, Working Paper Number 128, June 2006.; The President's Advisory Panel on Federal Tax Reform (2005)
[4] U.S. Department of the Treasury, "Approaches to Reform the U.S. Business Tax System for the 21st Century," December 20, 2007
[5] The President's Advisory Panel on Federal Tax Reform (2005)
[6] Alan J. Auerbach, Kevin A. Hassett, et al., "Toward Fundamental Tax Reform," AEI Press, May 2005

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