Right now, much of the Republican tax agenda is geared toward incentivizing investments in physical capital. But that’s not where the country’s real deficit lies. What’s sorely lacking is human capital.
Republicans in the House, Senate and White House argue that we need major corporate tax cuts to promote economic and employment growth. The mechanism goes something like this: If we lower taxes on returns to capital (i.e., corporate profits), then shareholders will make more capital available to businesses. With more capital available, businesses will be able to invest in more factories, robots, equipment, stores.