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>Trump reduces corporate tax from 35% to 21%.
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>China reduces corporate tax to ZERO.
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>Trump's chance of a second term may be reduced to ZERO by China. >
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> China Offers Tax Incentives to Persuade U.S. Companies to Stay >
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>foreign companies from paying tax on their earnings, a bid to keep
>American businesses from taking their profits out of China following
>.
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>There is, however, a catch: To be eligible, foreign companies must
>statement from the Finance Ministry. The measure is retroactive from
>Jan. 1 this year, the ministry said.
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>quality of foreign investment and encourage overseas investors to
>did not elaborate.
>
>Despite its appeal as a manufacturing hub, one where companies from
>around the world have set up operations to tap into a highly skilled
>work force and strong infrastructure, China charges high taxes. On top
>of a standard corporate rate of 25 percent, companies are required to
>make social security contributions and other payments that push their
>tax burden higher than it is in many other countries.
>
>The newly approved tax incentives in the United States could appeal to
>local competitors and tangled legal systems, or those that would rather
>spend their money at home or elsewhere. And officials in Beijing have
>worried that the overhaul could prove to be a challenge to Chinese laws
>
>overhaul in the United States, analysts have said that it is almost
>
>The American tax overhaul
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>has been promoted by President Trump and other Republican leaders as a
>move to make the United States more competitive globally. In particular,
>the new corporate tax rate is sharply lower, moving the country from
>having among the highest corporate tax rates
>
>to among the lowest. Under the plan, the rate will go to 21 percent from >35 percent.
>
>
This is the reasonable result of the "race to the bottom" on corporate tax rates, initiated largely by Ireland around 30 years ago (now
12.5%), and which we've just given a major kick in the ass. It is inevitable that any corporate tax reductions by the US will be matched or beaten by our major trading partners.
There really is no tax "reduction" involved. It's a tax transfer to consumers. I'm surprised it's taken this long for the race to the bottom to take effect in the US. It shows, I think, that the other major trading partners have been keying their rates to those of the US.
Our rates have barely budged since 1988, at which time we had one of the lowest rates among our trading partners. Now we're high -- but only in nominal rates. Our true, effective rate is now 27.7%, compared to the EU's true, effective rate of 27.2%. More than anything, it's a PR move and a payback to corporate election contributors. There is no connection between corporate tax rates and economic growth -- in fact, the linear regression shows a slight boost in GDP as rates go up.
What moves growth is the prospect of more sales. Thus, Ireland had very little GDP growth after reducing its rates. But it had a HUGE growth after it joined the EU and had all of those new customers to sell to, without tariffs.
The self-flagellation will continue until morale improves...