Money / Politics

Trump’s Corporate Tax Cut Will Boost Household Income $4k-$9k Yearly

money-wallet-incomeA new analysis released by chairman of the White House Council of Economic Advisers, Kevin Hassett, has revealed that President Trump’s initiative to lower the corporate tax rate will boost the average American family’s income by $4,000 to $9,000 each year.

Hassett, who earned his PhD in economics from the University of Pennsylvania, is one of the biggest proponents of the idea that tax cuts promote growth and higher wages. This concept is known as “supply-side economics,” and has been embraced by many of the most influential Republican lawmakers and officials, including President Ronald Reagan.

Hassett published a study on Trump’s economic initiatives, focusing on the president’s proposed corporate tax cut. His findings indicate that the cut would provide a massive boost to the household income, based on his estimate of the relationship between tax rates and wages. The study provides academic weight to the pro-worker basis of the GOP tax reform plan, specifically a reduction in the corporate tax rate from todays 35% to 20%. Whereas Democrats have predictably criticized the package, arguing that it would provide benefits to businesses but not to families, Hassett’s paper provides Republicans with an academic basis to challenge and disprove these leftist attacks.

“I would expect to see an immediate jump in wage growth,” said the head of President Trump’s economic council.

At the heart of Hassett’s argument is the observation that, in recent years, countries with low corporate tax rates have seen higher wage gains than countries with high corporate tax rates.

Wage growth has been disappointing since the Great Recession, rising about 2 percent a year, which is well below the nation’s historic average of 3.5 percent to 4 percent a year. Hassett estimates that wage growth will skyrocket to more than 5 percent a year after the tax plan is enacted, although it may take a few years to fully kick in. Trump and GOP lawmakers have argued that lowering the rate would make U.S. businesses more competitive with those from other countries as well.

Hassett calculates the 15% corporate rate cut could increase average household incomes from $83,143 in 2016 to between $87,520 and $92,222. Median household income — meaning earnings for more of a typical household — would rise from $59,039 to between $62,147 and $65,486. In an interview last week, Hassett mused the income gains could kick in quickly as businesses brought back the trillions in foreign earners they currently have overseas.

Critics say that the White House is greatly exaggerating how much working people will benefit, asserting that, instead, corporations will likely just pay out those earnings to shareholders. Hassett, however, reckons that much of the benefit of corporate tax cuts would accrue to workers, not corporate owners.

“Put simply, capital deepening, which brings additional returns to the owners of capital, brings substantial returns to workers as well,” the Council of Economic Advisers concluded.

Read the Full White House Analysis Here

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PaulE
3 years ago

Be careful in framing your argument in terms of this tax cut leading directly to an increase in wages. While tax cuts are indeed pro-growth and overall very good for the economy, there is nothing so far in the tax cut legislation that mandates businesses take their tax savings and apply them directly to increasing workers’ wages. While the tax cut may indeed lead to higher household income for people, income and wages are NOT the same thing and there is NOTHING in the Ryan plan that forces a direct correlation. The Democrats will harp on the term “wages” endlessly,… Read more »

Donald Tucker
3 years ago

So the savings would probably be passed on to stockholders instead of workers. I have news for you. Many of the workers are stockholders in the company they work for. Additionally most pension plans, both government and private or union, are invested in these same corporations and are in line to reap the benefits of lower corporate taxes. Most importantly, the global economy is competitive, and companies will go to where the tax rates are the best. Even if the reduced corporate tax rate doesn’t bring back jobs by the thousands or millions, it will stem the tide of jobs… Read more »

Wayne Peterkin
3 years ago

The tax cuts are intended and designed to promote a robust, growing economy which we have not had for years. The markets are not an indication that the economy is all that strong, only that investors anticipate that stronger economy if the government gets out of the way and does what’s right. Should the government fail to do that, the markets can come down just as easily as they went up. That robust economy, if we make it happen, creates jobs and increases wages. Always. In fact, tax revenues always go up as well, even though tax rates came down.… Read more »

Tom Wilde
3 years ago

Face it, no matter how well this is framed or how well it is presented, the Communist Left will shriek “tax cuts for the wealthy!”. Then of course, the Far Left Media will beat that to death with lie after lie and the ignorant Leftist stooges will all fall for it. Terrorist Antifa will mask up and take to the streets with nicely printed signs condemning any attempt to ease the burden on John Q. Public. The war of destruction will continue. The bitter affects of the Jimmy Carter Common (Communist) Core doctrine is too well ingrained in American youth… Read more »

Earl
3 years ago

I am not aware of any credible evidence to support his basic assumption that additional corporate cash flow will be given out as wages. On the contrary, the job market determines wages.

Bob N
3 years ago

As long as the corporations use the money to raise the wages and benefits of the workers and not to send top executives on luxury cruises and lavish vacations like they did with the bailout money If they don’t use the money to better their workers lives or to put more Americans back to work than they should lose their tax break status and have to pay the higher tax rate again.

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