White House: Tax cuts mean $4,000 more for families
WASHINGTON (AP) — By slashing corporate tax rates, the Trump administration said today, the average U.S. household will get an estimated $4,000 more a year.
This stunning 5 percent increase is likely to be met with skepticism from tax experts and Democratic lawmakers. Spread across every U.S. household, the White House analysis claims it would generate “conservatively” an income jump totaling $504 billion, or about $200 billion more than the revenues currently generated by the corporate income tax.
With this new report, the White House is making a populist argument for its proposal to cut the 35 percent corporate tax rate to 20 percent. Trump has pitched his tax plan as supporting the middle class even though the 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 — essentially rewarding these firms for avoiding taxes by exploiting loopholes and keeping profits overseas.
The analysis by Kevin Hassett, chairman of the White House Council of Economic Advisers, said that the considerably-lower rate would spur more investment by companies, which would then boost hiring and worker productivity. The 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 the lower corporate rates.
Separate studies, including a 2012 Treasury Department analysis, found that the vast majority of any savings would go to investors, making it unlikely to push up wages as much as the administration has argued. The administration removed the 2012 analysis from the Treasury Department’s website after releasing its tax framework last month with Republican congressional leaders.
Stocks surged after Trump’s election last year on the prospect of business tax cuts, but wage gains have been relatively tepid. Hassett said in a phone call with reporters that he expects 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 possibly increase taxes for many families. A preliminary analysis by the nonpartisan Tax Policy Center estimated that the proposal would cut business taxes by $2.65 trillion over a decade while increasing the tax burden on families and individuals by $471 billion.
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.