Summary
The principal intention of the article is to find out the effect of state corporate income tax rate cuts on job creation. The author's conducted an experiment trying to establish whether decreasing the amounts of corporate tax helped to spur economic growth which in turn resulted in the creation of employment. The authors of the article analyzed jobs created in economies where the corporate tax was reduced and economies where the taxes remained the same. The main conclusion was that reducing the amount of corporate tax paid enabled firms to hire more workers, which in turn resulted in more jobs being created. The regression results show that lower corporate tax rates have a significant and positive effect on employment growth since such companies have the resources to hire more workers. This study can be practically applied in the 2008 economic crisis, which led to companies firing a lot of people and many countries around the world experienced the highest levels of unemployment rates. Countries that wanted to change the situation quickly helped companies create jobs by reducing the amount of corporate tax paid to the government (Shuai, & Chmura, 2013). Through such measures, the companies were able to hire more people as they started adjusting to the new tax rates.
Critical Analysis
The main high point in the article was the argument that corporate tax cuts help firms create jobs in an economy. The case is timely and relevant as one can observe that only the countries which reduced their tax rates were able to achieve their goals of the highest number of jobs created. Such measures helped some countries such as the United States and Canada to bounce back after the disappointments of the 2008 economic recession which left many people unemployed. The authors' points are also applicable and relevant as they can be applied in a country experiencing a slow economic growth. The author conclusions appeared to be supported by the data since the study looked at the difference between the organizations which applied the corporate tax rates and the ones which did not. The entire study has no weakness in the data collection and analysis processes since they were done to perfection (Shuai, & Chmura, 2013). The only part could have been done differently is focusing more on the 2008 economic recession and how countries applied different methods to curb the rising unemployment levels.
Practical Applications
Anyone reading this article would be convinced that reducing the amount of corporate tax can help companies create more jobs as opposed to high corporate taxes. Some people still hold onto the opinion that taxes have no role to play in the growth of the economy but that is wrong. A reduction in any form of tax can help boost the economy since high taxes typically lock out some companies which could have operated and employed a lot of people. For instance, corporate tax is charged on businesses and sometimes the businesses that cannot afford to pay close down or move to countries with favorable working conditions.
Reading the article has made a difference since one can now realize that the effects of the 2008 economic crisis could have been mitigated had countries moved ahead to reduce some of the taxes affecting the manufacturing and processing industries (Shuai, & Chmura, 2013). The manufacturing and processing industries employ the highest number of people and thus were hardest hit by the recession making them retrench some workers. The empirical study offers candid conclusion concerning the impact of reducing corporate tax rate on employment, which has a positive correlation. The article can be used by economies as basis of policy and regulation formulation towards improving the rates of unemployment affecting numerous countries across the globe.
References
Shuai, X., & Chmura, C. (2013). The Effect of State Corporate Income Tax Rate Cuts on Job Creation. Business Economics, 48(3), 183-193. doi:10.1057/be.2013.21
