Glenn Hubbard, visiting chairman of U.S. President George W. Bush’s Council of Economic Advisers, offered a tip to Finance Minister Masajuro Shiokawa on Thursday, telling him that lowering the corporate tax rate helped stimulate economic activity in the United States.
The remark came after Shiokawa asked for Hubbard’s opinion on the economic effects of two options being considered for future tax policy — lowering the corporate tax rate or implementing tax cuts for firms that invest in research and development or equipment and facilities.
Hubbard replied that reducing the corporate tax rate had longer and thus better economic effects in the U.S., a Finance Ministry official said.
Hubbard was also quoted as saying that although the U.S. conducted tax cuts related to research and development, their economic impact was mixed.
Shiokawa replied that it is difficult to lower the corporate tax rate in Japan since it would benefit only the 30 percent of companies that are profitable — the only ones who currently pay corporate taxes.
Hubbard replied that lowering the corporate tax would nevertheless be very effective since the companies that would benefit are the leaders of the Japanese economy.
At the same time, Hubbard said Japan may need to cut back on public works spending and divert the money saved into helping finance tax cuts, according to the official.
Hubbard added that the U.S. economy is basically healthy due to solid economic fundamentals, while admitting that there are risks related to unstable stock prices and a rise in oil prices.
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