Trisha Shetty

Tax uncertainty

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Tax uncertainty is the term for the economic risk that results when future taxes and tax rates are undetermined. Similar to policy uncertainty, tax uncertainty can impact both individuals and businesses and has been shown in some studies to slow rates of economic growth.

In the United States

Temporary tax measures adopted in the 2000s, commonly referred to as Bush tax cuts, though extended in 2011, are scheduled to expire at the end of 2012. The uncertainty surrounding changes to tax rates, as well as the availability of certain tax deductions and credits, have led to many businesses holding off on hiring and reducing spending. Honeywell CEO David Cote cites tax uncertainty as the reason why Honeywell has replaced only one quarter of departing employees in 2012 saying, "The last thing you want is to hire a lot of people and then have to lay them off."

According to a report published by the Stanford Institute for Economic Policy Research financial and tax uncertainty have played a significant role in the slow recovery of the U.S. economy because uncertainty has led to a more cautious approach to investments and hiring. In November 2012 the analysis firm Macroeconomic Advisers predicted that, in the absence of a resolution, unemployment will rise to 8.5 percent and the U.S. economy will grow only 1.1 percent in 2013.

References

Tax uncertainty Wikipedia


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