Corporate & Securities Law

Mankiw Makes the Case for McCain’s Corporate Tax Cut

The article is in the NY Times (HT: Mankiw).  An excerpt:

A cut in the corporate tax as Mr. McCain proposes would initially give a boost to after-tax profits and stock prices, but the results would not end there. A stronger stock market would lead to more capital investment. More investment would lead to greater productivity. Greater productivity would lead to higher wages for workers and lower prices for customers.

Populist critics deride this train of logic as ?trickle-down economics.? But it is more accurate to call it textbook economics. Students in introductory economics courses learn that the burden of a tax does not necessarily stay where the Congress chooses to put it. That lesson is especially relevant when thinking about the corporate tax.

See also Luke Froeb on the gas tax holiday, which Mankiw describes as falling into the “almost laughable” category.

Full post as published by Truth on the Market on June 01, 2008 (boomark / email).