There is no incentive for companies to invest. There is no incentive for companies to pay employees more. There is no incentive for companies to return cash to shareholder.
Until you change the incentives within the system you will not gain any of the goals you are seeking. Taxes are a dis-incentive (Laffer). You tax things that you do not want. That said consumers are not going to spend more if you drop sales taxes because they aren't paid enough to increase spending.
You need to start with the legal system. Japan has to have a more reasonable bankruptcy system. Without this you will never get new business development. Japan is way behind the rest of the world in many ways because too few companies are started.
Banking regulations have to change drastically. You have to promote earnings and risk taking at banks. If you are a loan officer and the company you are lending to goes bankrupt -- the banker's career is ended.
The pension system is owned and operated by the government. They are not risk takers. Returns for the funds is no longer the top priority of the fund managers. You are more likely to lose the business (as a manager) if you don't focus on ESG than is you lose money for the pension. This is stupid and means that there is no incentive for the largest investors to focus on earnings they are forced to focus on ESG. Note there is no good source of information on ESG.
How do you change Japan from a worker mentality to a owner mentality? Without this you will get nowhere.
By the way, Reagan's tax strategy came from President Kennedy... not Mr. Laffer.
First, why would you look at pre-tax profits from "non-financial" companies? I believe the financials pay the same tax rates as other companies. You are skewing the data from the start.
Second, there is no evidence that your plan would be revenue neutral. The great Art Laffer has stated (correctly) you tax things you don't want. If you want to limit consumption -- tax consumption. If you don't want corporate profits -- tax corporate profits.
Lowering corporate taxes encourages business expansion. It makes companies more competitive internationally. Increasing corporate taxes could be a disaster.
There is zero evidence backing your statement that corporate tax revenues would have increased if tax rates had remained at 50%. It is completely possible that revenues would have fallen because the onerous tax rates reduced the earnings of companies. Also, having the highest corporate tax rates in the developed world invites companies to do everything they can to move earnings off shore.
Businesses are very dynamic. You can't use cherry picked numbers and static analysis. You could be right, but it is highly unlikely.
I used nonfinancial company data only because the financial corp. data did not come in a form that allowed this kind of comparison to corp. taxes. A look at other data showed nonfinancial to be about 75% of the total profits. So, I noted it and indicated that the resulting numbers gave a rough sense of the situation.
Whether or not lowering corporate income taxes encourages expansion is an empirical question where the outcome depends on conditions in a particular nation. Japan's firms loaded to the gills with cash and could, if they wanted, easily finance investment in plant and equipment or intangibles like R&D and software. Instead, investment has slumped and they put cash into financial securities because they don't see profitable business investments in Japan. Corporate cash is now higher than investment to the tune of 6-7% of GDP. Even if tax rates had been maintained, they'd still have plenty of cash left to invest if there were profitable opportunities. Tax cuts are not a magic wand.
Lowering their overall taxes rewards them for investments that they've taken in the past, not for doing new investments at present. If you want to incentivize investment, an investment tax credit does a lot more at a lot less cost to the budget. And, the key factor guiding volumes of investment is the expansion of the market. If consumers had more income and thus spent more, that would expand the market.
Laffer is mostly known for his discredited prediction that Reagan's tax cuts would lower the deficit.
Your last comment proves you have no credibility! The largest increases in US Federal tax receipts occurred during the economic expansion following the Reagan tax cuts (over 70% increase in Federal tax receipts between 1983 and 1990 or 8%/year compounded -- on much lower tax rates...)! Go read about it! The reason the budget deficit is that Reagan's military spending expansion was even greater than the revenue increase.
You tax things you don't want. If you want investment -- promote investment. Japan is a failed system because it rewards being average. Japan does not reward risk-taking. Japan does not have an equity culture. Companies hoard cash because it is rewarded -- if you want them to stop... reward what you want. Taxing is the opposite of rewarding. If you tax something you will get less.
There is no incentive for companies to invest. There is no incentive for companies to pay employees more. There is no incentive for companies to return cash to shareholder.
Until you change the incentives within the system you will not gain any of the goals you are seeking. Taxes are a dis-incentive (Laffer). You tax things that you do not want. That said consumers are not going to spend more if you drop sales taxes because they aren't paid enough to increase spending.
You need to start with the legal system. Japan has to have a more reasonable bankruptcy system. Without this you will never get new business development. Japan is way behind the rest of the world in many ways because too few companies are started.
Banking regulations have to change drastically. You have to promote earnings and risk taking at banks. If you are a loan officer and the company you are lending to goes bankrupt -- the banker's career is ended.
The pension system is owned and operated by the government. They are not risk takers. Returns for the funds is no longer the top priority of the fund managers. You are more likely to lose the business (as a manager) if you don't focus on ESG than is you lose money for the pension. This is stupid and means that there is no incentive for the largest investors to focus on earnings they are forced to focus on ESG. Note there is no good source of information on ESG.
How do you change Japan from a worker mentality to a owner mentality? Without this you will get nowhere.
By the way, Reagan's tax strategy came from President Kennedy... not Mr. Laffer.
First, why would you look at pre-tax profits from "non-financial" companies? I believe the financials pay the same tax rates as other companies. You are skewing the data from the start.
Second, there is no evidence that your plan would be revenue neutral. The great Art Laffer has stated (correctly) you tax things you don't want. If you want to limit consumption -- tax consumption. If you don't want corporate profits -- tax corporate profits.
Lowering corporate taxes encourages business expansion. It makes companies more competitive internationally. Increasing corporate taxes could be a disaster.
There is zero evidence backing your statement that corporate tax revenues would have increased if tax rates had remained at 50%. It is completely possible that revenues would have fallen because the onerous tax rates reduced the earnings of companies. Also, having the highest corporate tax rates in the developed world invites companies to do everything they can to move earnings off shore.
Businesses are very dynamic. You can't use cherry picked numbers and static analysis. You could be right, but it is highly unlikely.
I used nonfinancial company data only because the financial corp. data did not come in a form that allowed this kind of comparison to corp. taxes. A look at other data showed nonfinancial to be about 75% of the total profits. So, I noted it and indicated that the resulting numbers gave a rough sense of the situation.
Whether or not lowering corporate income taxes encourages expansion is an empirical question where the outcome depends on conditions in a particular nation. Japan's firms loaded to the gills with cash and could, if they wanted, easily finance investment in plant and equipment or intangibles like R&D and software. Instead, investment has slumped and they put cash into financial securities because they don't see profitable business investments in Japan. Corporate cash is now higher than investment to the tune of 6-7% of GDP. Even if tax rates had been maintained, they'd still have plenty of cash left to invest if there were profitable opportunities. Tax cuts are not a magic wand.
Lowering their overall taxes rewards them for investments that they've taken in the past, not for doing new investments at present. If you want to incentivize investment, an investment tax credit does a lot more at a lot less cost to the budget. And, the key factor guiding volumes of investment is the expansion of the market. If consumers had more income and thus spent more, that would expand the market.
Laffer is mostly known for his discredited prediction that Reagan's tax cuts would lower the deficit.
Your last comment proves you have no credibility! The largest increases in US Federal tax receipts occurred during the economic expansion following the Reagan tax cuts (over 70% increase in Federal tax receipts between 1983 and 1990 or 8%/year compounded -- on much lower tax rates...)! Go read about it! The reason the budget deficit is that Reagan's military spending expansion was even greater than the revenue increase.
You tax things you don't want. If you want investment -- promote investment. Japan is a failed system because it rewards being average. Japan does not reward risk-taking. Japan does not have an equity culture. Companies hoard cash because it is rewarded -- if you want them to stop... reward what you want. Taxing is the opposite of rewarding. If you tax something you will get less.