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At first look the reply appears apparent—no. However not everybody sees issues that method. Right here’s Bloomberg:
Biden may even ask lawmakers — as he did in final yr’s funds request — to impose the 21% minimal on multinational companies, which the White Home says would lead to substantial new taxes on pharmaceutical firms. He additionally desires to quadruple the tax firms should pay after they purchase again their very own inventory to 4% from 1%. Democrats have proposed buyback taxes as a technique to encourage firms to spend money on workforces and gear over share repurchases.
Companies have a number of other ways of rewarding traders. One technique is dividends. One other method is to make use of a inventory buyback, which ends up in capital good points. Many traders choose to obtain capital good points, that are usually handled extra favorably than dividends within the federal tax code (partly as a result of the good points usually are not taxed till the inventory is offered.) By taxing inventory buybacks, the federal government can be elevating the efficient tax charge on capital formation.
These taxes don’t encourage funding—simply the other. As an alternative, they have an inclination to push funding into much less productive areas. Thus suppose firm A can earn a 5% charge of return on capital and firm B can earn a ten% charge of return. Ideally, income earned by firm A can be paid out to homeowners, who would redirect funds to investments made by firm B. This tax provision appears motivated by the need to make every firm extra self reliant, relying by itself inside funds for capital funding. However an economic system the place every group is self-sufficient is way much less environment friendly than an economic system structured round specialization and commerce.
Maybe there may be another motivation for this proposed tax change. If that’s the case, I can not think about what it’s.
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