There are many good reasons to undertake corporate tax reform this year. Politicians from both sides of the aisle have declared support for cutting the headline corporate tax rate and recouping the lost revenue through a broadening of the tax base. President Obama’s budget for fiscal year 2016 calls for a cut in the corporate tax rate from 35 to 28 percent (with a special rate of 25 percent for manufacturing). Former Ways and Means Chairman David Camp’s tax reform proposal from last year called for a cut in the rate to 25 percent. The recent Rubio-Lee proposal would similarly cut the rate to 25 percent. There is even speculation that Paul Ryan and President Obama may be working on a deal to cut headline rates this year. Here’s why we need to get this done.
Buy Low and Sell High!
Though this is what investors aim for, many (most?) wind up doing just the opposite. Companies buying or selling their own shares are notorious for their awful timing. Rather than indicating merely lousy skill, many times it points to corporate leaders acting in their own, personal interests, even when that is opposite to their fiduciary responsibility of working for the benefit of all shareholders.
When you hear a CEO say that the company is buying back its own shares ‘To release shareholder value,” you may need to dig deeper. After that kind of “handshake,” you may want to count your fingers.
Witnesses observing a crime in progress may tell different stories. Economists looking at the same chart describing the US Economy also may not agree on what’s going on.
A recent article on the American Enterprise Institute (AEI) web site, by James Pethokoukis, The Rise of the Machines vs Workers, in One Chart, showed the following chart: