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As the year 2001 unfolds and the presidency of George W Bush begins to preside over the country income tax rates have become a concern President Bush is pushing for a new income tax bill that will reduce the tax brackets from 15 28 31 36 and 396 to a new bracket in 2006 of 10 15 25 and 33 A cut in individual income taxes would benefit most Americans and is well deserved However there is no plan to cut the corporate tax rates as of yet Such a decline to the corporate tax rates could spawn a number of possibilities for firms and even influence the market However will a decline in the corporate tax rate positively influence market volume and different firms financial activities ie investing repurchasing options A question of this nature can be answered through analysis of two companies benefits or detriments due to the reduction There is a basic relationship between the market volume and corporate tax rates A decrease in the corporate rates would allow companies to pay less on their earnings leaving them with more Net Income NI With this increase in net income a company can afford to invest in other areas or allows them to repurchase their stock By repurchasing stock the market volume drops by the amount of stock that has been bought back In addition buying back shares can affect the overall outcome of the market that day depending on the company engaging in the repurchase A company with a large stake in the market who buys back a considerable amount of stock will cause a fluctuation in the volume In buying shares the overall status of the market will rise due to the price increases that occur On the other hand if the opposite occurs in which the tax rate is augmented some firms may have different decisions to
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