There's one very important reason why the corporate tax rate had to be cut. Here's why.
I had an interesting experience recently. One that I think every American no matter who you are or where you come from can relate to. I was in TJ Maxx (a popular discount retailer in my area) last week looking for some stocking stuffers for Christmas. They have items that, not only will you not find in most other stores, they have them at a reasonable price.
So, wandering the store, I found some items, put them in my basket and headed to the register. While standing in line, I looked around at the shelves all retailers like to place around you to hopefully encourage a few last minute purchases. As I was looking around, I saw a four-pack of readers on display. Now, if you are like me, you go through reading glasses at a steady clip. They just seem to drop off the face of the earth.
So, of course, I buy more. You can never have enough readers around the house.
So I picked up the four pack of readers at the magnification I normally use and looked at the price. Then I looked again. They were $10. I couldn't believe it; just $10! At Sam's Club, which up to that point was the cheapest place I could find for readers charges $20 for a four pack! This was HALF the price!
So I put them in my basket and said to myself, "that's the last time I buy readers from anywhere else but TJ Maxx." Or, at least until I find them cheaper somewhere else. Perhaps I should check the Dollar Store.
But I digress.
If you were in my shoes, what would you do? Almost certainly, you will give your business to the store which gives you the best value for your money. Yes, consumers like myself might pay more if there's a large difference in quality, but barring that, we'll favor the store with the lowest price. That's something we know from numerous research and data on consumer behavior.
And that's how companies work when it comes to our tax system.
In order to survive in a global economy, a business must be able to generate enough profit to grow the business, pay employees, and price their goods and services competitively. Which is why a business will naturally gravitate towards a state, or a nation, with lower tax rates.
When I was in TJ Maxx last week looking at the $10 price tag on the four pack of readers, I momentarily thought to myself, "I've been getting ripped off." I felt cheated that I had paid twice as much when I didn't have to. Don't you think a business will feel the same way? Why would a company remain in the US and pay a 39% tax rate when they could move to Canada and pay 15%? Or to Ireland and pay only 12%? They could go to Mexico even and pay 20%; about half of what they would pay in the US.
Why do you think Democrats and Republicans, including even Donald Trump, were threatening American businesses moving some or all of their operations overseas with financial penalties? But threats and penalties would only make such moves more likely, not less.
So Republicans did the only thing they could do to stop the outflow of jobs from the country; they lowered the tax rate so as to bring it right in line with global averages, which currently run about 22%. This was the right thing to do. This is what you would expect any retail establishment to do with the price of their goods when the store right down the street began offering the same goods for half the price. It's simple. They lower the price, or they lose business. If they lose enough income, they go out of business. It's not only the way of the business world, it can affect entire nations.
You wouldn't pay twice as much for goods and services, why should a business owner? It's as simple as that.