Milestone 3
The policy of the Federal Reserve Bank is to “promote maximum employment, stable prices, and moderate long-term interest rates (Federal Reserve Education, 2022). The Policy of the Central Bank is to adjust the supply of money though open market operations mostly like taking money from commercial banks (International Monetary Fund, 2022). In the key market, the United States, the Federal Reserve Bank, and the Central Bank keep monetary values circulating throughout the economy to keep the economy in good standing. They can withhold certain amounts of revenue and loan out certain amounts of revenue based on the ratio of operation.
The Federal Reserve Education explains the use of the Federal Open Market Committee in a four-step plan: first, the target range is set and policy is implemented, second, the policy effects market interest and financial conditions, third it influences consumer spending, and lastly it progresses towards employment and stable prices(2020). This beneficially effects Dow because of a steady flow of factory workers and stable prices of supplies and demands.
The Federal Reserve Bank and the Central Bank effect Dow’s Economic Growth because Dow was able to undergo massive growth without a revenue cut because of the price of taxes. Dow earned 1.5 billion US dollars minus state and local taxes. Although Dow is one of the world’s leading chemical companies, they are one of the few Fortune 100 companies that did not pay any federal income tax in 2021 (CAP, 2022). The company will be undergoing tax refunds instead of paying federal income tax, although their income tax was at a 123.94 % increase at 1.74 billion dollars in annual income taxes (Macrotrends, 2022).
The United States imposes a tax on the profits of US resident corporations at a rate of 21 percent (reduced from 35 percent by the 2017 Tax Cuts and Jobs Act). The corporate income tax raised $230.2 billion in fiscal 2019, accounting for 6.6 percent of total federal revenue, (Tax Policy Center, 2020). Within the policies there are checks and balances to keep the economy and the regulations within reasonable cause of their mission. As Dow is a large corporation, it plays a major effect on the value of the GDP of the United States based on their business and market trends.
The Fiscal Policy of the United States is used to adjust government spending and tax rates to influence the American economy. Regarding the two key markets in which the fiscal policy effect’s Dows growth would be infrastructure and chemical markets. As the material science company influences many markets, the infrastructure market sees a large impact when taxes or monetary values ae changed due to the nature of construction, zoning, and taxes on permits for infrastructure sites. Regarding the chemical market, laws and regulations are seen when taxes ae implemented over hazardous material on the roads though services and taxes. The use of the Federal Reserve Bank and the Central Bank to regulate taxes and stimulate the economy has been very beneficial for Dow especially after their tax exemption, which has had a major impact on economic growth.
References:
Dow. (2022). Building Construction and Infrastructure. Dow, Inc. https://www.dow.com/content/dcc/en-us/category/market/mkt-building-construction.html
Fortune. (2022). Dow. https://fortune.com/company/dow/
International Monetary Fund. (2022). Monetary Policy and Central Banking. International Monetary Fund. https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/16/20/Monetary-Policy-and-Central-Banking#:~:text=Central%20banks%20conduct%20monetary%20policy,in%20money%20from%20commercial%20banks.
Koronowsk, R., Vela, J., Rasheed, Z., and Hanlon, S., (2022). These Fortune 100 Companies Paid next to nothing – or nothing at all – in taxes in 2021. https://www.americanprogress.org/article/these-19-fortune-100-companies-paid-next-to-nothing-or-nothing-at-all-in-taxes-in-2021/#:~:text=Dow%20Inc.%20reported%20that%20it,tax%20refund%20of%20%2446%20million.
Macrotrends. (2022). Dow income Taxes 2017-2022. https://www.macrotrends.net/stocks/charts/DOW/dow/total-provision-income-taxes
Tax Policy Center (2020). Key Elements of the U.S. Tax System. https://www.taxpolicycenter.org/briefing-book/how-does-corporate-income-tax-work#:~:text=Business%20Taxes,-1%2F4%3E&text=The%20United%20States%20imposes%20a,from%209%20percent%20in%202017.
Hi Emily,
I enjoyed reading you blog. Gross domestic Products have declined the past two quarters, but GDP often has big revisions after it's initial release, averaging a full percentage point of change between the first estimate and it's final revision months later. Gross domestic income (GDI), which measures the same thing-economic growth-from a different angle: In practice, the measures aren't quite equal, but this year they're pointing in opposite directions: GDP says the economy is shrinking, while GDI it's growing. Averaging the GDP and GDI together, as NBER does, suggests the economy has largely stayed the same in the first three months of the year.