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The Trump administration said on Monday the average US household will get an estimated $4,000 more a year after corporate tax rates are slashed under its planned tax reforms. Proposing a stunning 5% increase in household income, the claim is likely to be met with skepticism from tax experts and Democratic lawmakers.
Pre-empting such opposition, Donald Trump tweeted: “The Democrats only want to increase taxes and obstruct. That’s all they are good at!”
A White House analysis claimed the tax cut would “conservatively” generate an income jump of $504bn, about $200bn more than revenues currently generated by the corporate income tax.
The Trump administration is making a populist argument for its proposal to cut the 35% corporate tax rate to 20%. Trump has pitched his tax plan as supporting the middle class even though its details point to major companies and the wealthy as the biggest winners.
Polls suggest that voters generally frown upon the idea of cutting taxes for businesses – which is seen as essentially rewarding firms for avoiding taxes by exploiting loopholes and keeping profits overseas.
The analysis by Kevin Hassett, chair of the White House Council of Economic Advisers, said the considerably lower rate would spur more investment by companies, which would then boost hiring and worker productivity.
Average income gains from the reduced rate would range from $4,000 to as high as $9,000, the administration said. Those figures, however, rely on research arguing that workers – rather than investors – would primarily benefit from lower corporate rates.
Separate studies, including a 2012 treasury analysis, found that the vast majority of any savings would go to investors, making such a cut unlikely to push up wages as much as the administration has argued. The administration removed the 2012 analysis from the treasury website after releasing its tax framework last month with Republican congressional leaders.
Stocks surged after Trump’s election win last year on the prospect of corporate tax cuts but wage gains have been relatively tepid. Hassett said in a phone call with reporters that he expected salaries to begin climbing if the proposed tax overhaul is passed.
For individuals and families, the Trump plan would reduce the number of tax brackets to three from seven and double the standard deduction. But it would also remove the personal exemption and possibly much of the deduction for state and local taxes – changes that could increase taxes for many families.
A preliminary analysis by the nonpartisan Tax Policy Center estimated that the proposal would cut business taxes by $2.65tn over a decade while increasing the tax burden on families and individuals by $471bn.
Hassett criticized those findings in a speech this month as a “fiction” that is “scientifically indefensible” because critical details of the proposal remain unknown. But Hassett said enough details are now known about the plan to support his conclusion that it would lead to income gains and stronger economic growth.
(THE GUARDIAN)
