1. Proponents of the corporate tax reduction claim that reducing corporate rates

Question

1. Proponents of the corporate tax reduction claim that reducing corporate rates and making depreciation more generous will induce corporations to investment more, increase employment and grow wages and the economy.

In fact, for the past 50 years, corporate investment has responded to economic and tax variables and the investment has taken the form of laborsaving technology (robotics) that requires fewer workers to produce the same or more output.

If you worked for a multinational firm, would you secretly wish for a corporate tax cut and why?  

Explanation / Answer

I will advocate for tax cut

* Lower taxes means higher disposable income to spend . Income can be used to invest further. Investment will create jobs, increase in income etc.

* Higher disposable income means corporates can pass on this as higher wages for employees .

* There is a misconception that Robotics will replace labour . This is not because to make machines you need Labour. The only thing is that you have to differentiate between skilled and unskilled labour.

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