I guess this is pick on Mankiw day.
I see he is now in favor of the McCain proposal to cut the corporate tax rate to 25%.
But the effective corporate tax rate was already 24.2% at the end of 2007.
P.S. Mankiw promises many benefits if we cut the corporate tax rate from 35% to 25%.
OK, in the first quarter of 2000 the effective corporate tax rate was 35.3%. It is
now 24.2%. We have had a real time actual economic experiment where we actually
achieved the proposed policy change. But I do not see the benefits Mankiw
promises like a drop in the cost of capital. Would someone care to show us where I can find the free lunch the Republicans keep promising.
P.S.S. Maybe cutting the corporate tax rate to 25% would be a good idea. I propose we write tax
legislation to do exactly that. However, the new tax legislation will eliminate all other
provisions of the corporate tax code. This would include things like oil depletion
allowances. It also means that foreign earnings would be taxed at 25% in the year they
were earned regardless of whether or not they were repatriated. Corporate
depreciation of capital spending would either be on a cash basis, 100% in the first year , or straight line depreciation. No other depreciation methods are allowed. All other provisions of the corporate tax code are hereby rescinded and eliminated.
Do you think the Mankiw would agree to this change in the corporate tax code?