More influential individuals are speaking out in favor of using tax cuts to stimulate the economy. However, the most cost-effective way of creating jobs, as the THOR Plan lays out, is the reduction of the corporate tax rate. The President’s stimulus plan does not encourage marginal growth in the economy like a decrease in the corporate tax would. Right now, the country needs this kind of flow of capital that would immediately have a positive impact. Corporate tax cuts should also have corrresponding corporate governance guidelines like those in the THOR Plan in order to bring back confidence in the stock market.

While governmental funding for projects provides the capital necessary to move them forward, creating jobs and improving infrastructure – both positive things – it falls short of the benefits in the short and long term of a reduction in the corporate tax rate.

Stephen Entin, the president and executive director of the Institute for Research on the Economics of Taxation, summarizes the benefits of a corporate tax cut in the following excerpt from January 27, 2009’s Wall Street Journal.

We need a permanent improvement in the production climate. What would help? A lower corporate tax rate, as well as a permanent extension of the 2008 expensing provisions and the 2003 dividend and capital gains and top marginal income tax rates. On the regulatory side, lifting the burdensome auto fuel economy standards and alternative fuel requirements would help, as would an elimination of restrictions on oil drilling.

Taxes and regulations raise the bar for investment to be profitable after-tax, and they fall especially hard on capital-intensive industries such as manufacturing and resource extraction. We have the second-highest corporate tax rate in the developed world (after Japan). A lower rate would make us a more attractive location for business. Similarly, the excess of the U.S. corporate tax rate over the foreign rate is imposed on repatriated earnings — keeping foreign-source earnings abroad exactly when domestic credit is hard to get. To spur investment in 2004, Congress declared a partial tax holiday on repatriated earnings. Now would seem an opportune time to do so again.