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26.4.17

President Trump's Planned Corporate Tax Cut and the Effect on Globalization

President Trump's Planned Corporate Tax Cut and the Effect on Globalization
By [http://EzineArticles.com/expert/Colin_A_Struckmann/2399109]Colin A Struckmann

President Donald Trump is a very controversial figure and he has been ever since he decided to run for president, and maybe even before that by some people. People either hate him or like him there is not much in between. The same goes for most of which he is trying to accomplish as the new President of the United States. One of his proposed plans is to cut corporate taxes down to 15 percent from 35 percent. This proposed tax cut has a major effect on not only the U.S., but the whole world. This tax cut effects globalization and has a possibility of having a positive impact for the country.

Globalization is affected by the change of where companies want to be because of tax laws. A lot of companies decide where they locate some of their businesses and headquarters by the tax laws in the countries they are considering of setting up in. With President Trumps plan to cut corporate taxes from 35 percent to 15 percent it will make companies want to come back to the United States. One reason companies would want to come back to the United States or start their business there, if this corporate tax cut does happen, is because it would put the United States as tied for third lowest corporate tax rate in the Organization for Economic Cooperation and Development (OECD). This organization includes 35 different countries, some of which are Japan, France, Germany, Mexico, and Italy to name a few. The only countries lower than the United States would be Ireland and Switzerland, plus the U.S. would be tied with Canada at 15 percent. Compared to where the country is now, which is the highest in OECD. Having this low of a tax would entice companies to come to the United States to operate their business because a lower corporate tax allows companies to keep more of their profits.

This plan does not only benefit the corporations. It also benefits shareholders around the world. As mentioned before with the lower tax rate comes more profits for the companies taking advantage of the lower tax rate. This could also mean that those companies will declare more dividends because they have more revenue. This would directly benefit the shareholders. Even if the company does not declare dividends, whether because they have not declared dividends in the past or if they just did not feel like declaring extra dividends from the revenue increase, there would still be a positive impact on shareholders from the proposed corporate tax cut. The benefit they would receive would be that it would probably lift the stock market earnings up. This would help stockholders because they would be getting more money from their investments even if the companies they invested in did not pay out dividends because of the increased revenue that would likely come with the lower tax rate.

Trump's corporate tax plan goes even farther than helping the corporations and the stockholders. His corporate tax cut plan helps Americans. The first way his plan benefits Americans is that when corporations decide to build their factories and companies here they are going to need workers to work there. Thus, creating jobs for Americans that are in desperate need of jobs. Another way his plan benefits the American people is that it could bring prices down on goods. The reason for this is because the companies that would move or start up here would have the products in the United States already. So, they would not have to pay to have them shipped back into the United States, thus allowing them to lower the costs on some of their products to help them sell more of the products. Globally this does not really help other countries. The exact opposite that is happening in the United States would happen in the countries where the companies move from. However, it should not be as dramatic of a change because some companies may be loyal to the country they are in and not move just because of the tax cut that Trump plans to enact in the U.S.

Whether President Trump's proposed corporate tax cut comes into effect or not remains to be seen. However, no matter if it passes through congress and becomes the new corporate tax, it will affect everyone around the world. The tax plan would help the U.S. out with a lot of things, but also has a huge effect on globalization.

References:

OECD. "Corporate Income Tax Rate Table." Table II.1. Corporate Income Tax Rate. OECD, n.d. Web. 18 Apr. 2017. < http://stats.oecd.org//Index.aspx?QueryId=58204 >

Article Source: [http://EzineArticles.com/?President-Trumps-Planned-Corporate-Tax-Cut-and-the-Effect-on-Globalization&id=9671280] President Trump's Planned Corporate Tax Cut and the Effect on Globalization