Saturday, May 28, 2016
The Changing Economics Of Corporate Tax Cuts
Corporate stock ownership has shifted dramatically over the last few decades. Most of the shares were held US taxpayers in taxable accounts. Consequently, corporate tax cuts increased the value of stocks in taxable accounts which helped to pay for the corporate tax cuts. That is no longer true. A large majority of stock ownership is now held in tax deferred accounts and by foreign investors. Corporate tax cuts still increase the value of stocks but foreign investors pay taxes on the capital gains in their home countries and taxes are deferred in a variety of US retirement accounts. Increasing shareholder value by cutting corporate taxes has become more costly in the US.