Imagine you own a business, and in the interest of selling more of your products, you lower your prices. After cutting the prices, some customers buy more, some buy the same and some actually buy less of your products. Is that an efficient way to increase sales? No. Yet, that is what Congress would be doing if it universally lowered the corporate tax rate.
This is a highly inefficient way to try and create more jobs. If companies that do not create more jobs receive the same tax breaks as companies creating more jobs, there are fewer tax breaks available for the companies creating jobs. Additionally, when tax cuts are not contingent on creating jobs, companies don’t have an incentive to create jobs – they get the tax cuts whether they create jobs or not. Last, universally cutting corporate tax rates creates a free-rider problem in which companies reducing jobs in America benefit from the same lower tax rate as companies creating jobs in America.
Solution: Tie the tax rate each company pays to each company’s rate of American job creation.
This would move us from hope-based tax cuts to a performance-based tax policy in which there are greater tax cuts for the actual job creators.
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