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To: Meet the New Boss

There would need to be many scenarios run to validate your assumptions on this.

In lowering the domestic, corporate income tax from 39% to 9%, we would also be eliminating corporate tax deductions such as depreciation, labor, benefits, etc. Indeed Cain touts his plan as ‘revenue-neutral’, and I do not see a significant shift between domestic corporate costs and foreign corporate costs.

Companies choose to locate plants in various places for many reasons. Why else would so-called ‘foreign-car’ makers such as Toyota, Honda, and Nissan have so many plants here in the USA?


158 posted on 10/19/2011 7:56:57 PM PDT by beancounter13
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To: beancounter13

There is no question that for a capital-intensive business like manufacturing there would be a benefit from the Cain plan. (The Cain plan does NOT eliminate deductions for cost of capital investments (depreciation) but it does eliminate deductions for labor costs.)

“I do not see a significant shift between domestic corporate costs and foreign corporate costs”

In my example of the $20 in tax, there was a shift of $5 of tax onto the goods sold by the foreign corporation.

In principle, in the aggregate under the Cain plan, ALL OF THE SALES TAX collected on goods sold by foreign manufacturers is a shift of tax onto the foreign businesses, since consumers are making decisions based on after-tax prices.

Of course there is a matrix of factors businesses consider in deciding where to manufacture. But OBVIOUSLY it helps to give them more of an economic advantage to doing so domestically under the Cain plan.


160 posted on 10/19/2011 8:07:03 PM PDT by Meet the New Boss
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