Clinton Administration's Proposal to Increase Taxes for Multinational
My topic is the increase if the taxes which Clinton Administration is
planning. This increase in taxes will target "multinational Corporations, end
the favored tax treatment of extra long term bonds", It will also raise capital
gains taxes by "changing the rules for computing the cost basis of securities
when they are sold at a profit". What this will do is increase the taxes for the
rich and will decrease the difference between the rich and the poor. The plan is
intent on cutting the middle class tax and finance higher education (yeah right).
The current tax law decreases the Federal Treasury Revenue and makes the economy
less efficient or less competitive.
The multinational tax would disallow multinationals to assume half of
their goods are foreign even if they are made in the US. Thus they could export
to a country with low taxes and thus pay less taxes. This change would bring an
increase of 7.9 Billion in corporate taxes over the next 5 years.
This withdraws a lot of money from the economy and may thus decrease
demand for goods, as people have less money to spend. The multinationals would
employ many people and with and increase in their cost (tax is a type of cost)
they would be forced to decrease the average amount of wages which the their
employees received. This may take the form of decreased raises, or the laying
off of some people. This would thus decrease aggregate demand for goods
Nationally (as Multinationals would employ people in the US). It would also
cause the companies to produce their goods in other countries and thus decrease
the amount of people employed in the US. It would help the economy of other
countries as those multinationals would move there. Thus the supply of goods
demanded in the US would decrease. This decrease in economic activity (due to
the reduction of the money supply and the wages of the people) would cause the
economy to slow down and may plunge the country further into recession. These
companies may also provide goods for the US and would thus decrement the supply
of goods in America.
The multinationals produce goods in the US to export into other
countries. This would decrease. They would produce goods in the countries with
lower tax costs and import them into the US. With the US balance of trade in
such a poor shape, I am sure that any further damage to it would not be
beneficial to the economy.
They also wish to force people to use a bundle of stocks when computing
capital gains tax. Presently there are 3 methods for computing the "cost basis
of stock" and most people, like the economic man, attempt to reduce the amount
of tax paid. This would bring another 600 million a year. Thus there would be
even less money in the economy and that would further decrease demand. Wall
Street would have a decrease in trading as people would not buy as many stocks
as they did before, and the economy would lose out due to the multiplier effect,
of the people in Wall Street losing a little, and passing this on to the shops
which they buy things from etc..
These proposals would prevent the large corporations from getting more
capital, but increase the amount of small business in the economy. This change
in the market structure may be good and bad. The sole proprietor would benefit
due to the tax cuts to the middle class. However the large companies, which are
usually Public Limited Companies would lose out.