When you think about how governments raise money, they have only 2 real choices to raise the bulk of their revenues – taxes from individuals and taxes from companies. In the words of most politicians for the past 20 years it should be a balance but reality was cutting was heavier on the corporate side. Under former President Trump, the US cut its corporate tax rate from 28 to 19% and this helped boosted profits at corporations. How it helped employment and raised wages is a different story but corporations benefited. In the US, deficits have increased but there was no corresponding increase in personal taxes or the government just collected less. If you expect the government to do less, that is a good thing.

During the pandemic, governments around the world have boosted spending because people could not meet in groups and if you think about how many activities people do that need people to gather from conventions, to sporting events, to going to restaurants and bars, to any gathering. Around the world, people were told not to gather, which meant for many people they were without a job or anything to do at their place of work, the government supported them. As the vaccines are placed in more and more arms, the ability to consider and begin to expect to meet becomes part of the expectations of where the economy is going. How does government pay for the extra expenses?

In England, the Treasury Secretary or Chancellor of the Exchequer Rishi Sunak announced a corporate tax hike from 19% to 25%. According to an article by Paul Waldie of the Globe and Mail, it was the first time the rate has been increased since 1974 after successive Conservative governments lowered it from 28% over the past decade.

The Chancellor said it was not popular but it was the honest thing to do. Britain has spent almost $705 billion on various supports for business and workers. The government borrowing is over $640 billion in 2020 which is more than anytime since WW II. Total debt is almost 100% of gross domestic product (GDP).

The increase in corporate tax is expected to bring in additional $30 billion by 2025 according to the Office of Budget Responsibility, the government’s fiscal watchdog.

Britain was harder hit by COVID than most European countries and its economy shrank 9.9% last year. It also is dealing with the Brexit, but there are signs the economy is recovering, but there is still a long difficult spring to get through.

Linking to dividend paying stocks, governments around the world will be looking at those companies who can still earn profits and think we need a bigger share to pay down debt. The usual arguments will be given, but the reality is if governments want to pay down debt, there are few choices other than to raise corporate income taxes.

There are more questions than answers, till the next time – to raising questions.