For me, Hassett’s biggest contribution to the tax debate is the notion that high corporate tax rates depress the wages of workers.
.. Because companies have stashed profits overseas, and because the U.S. tax cost of investment is so high, middle-income wage earners have suffered mightily. Hassett — and his AEI colleague Aparna Mathur — have argued for over a decade that if you want to raise wages, cut corporate tax rates.
.. “for the median household in the U.S., the top corporate marginal rate cut from 35 percent to 20 percent would boost wage growth almost four-fold.”
.. Hassett has argued that 70 percent of the benefits of lower business tax rates accrue to middle-income wage earners — in other words, Donald Trump’s middle-class base.
.. former CEA chair Glenn Hubbard recently wrote in the Wall Street Journal that too many economists fail to consider the share of the U.S. corporate tax burden borne by labor — 60 percent according to his research
.. concluded that it would boost wages by 8 percent.
.. It’s the difference between a prospering and optimistic middle class and a pessimistic middle class that lives day-to-day, paycheck-to-paycheck.
.. Trump’s tax-cut and regulatory-rollback policies are aimed directly at ending the war on business, which has dragged down the economy for nearly two decades. Let’s reward success rather than punish it.
Corporate Tax Cuts Would Benefit Ordinary Americans
An E.U. Study in 2007 found, for example, that “a ten percentage point increase in the corporate tax rate of high-income countries reduces mean annual gross wages by seven percent.”
.. “workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates,”
..A lower corporate rate leaves more after-tax profits for firms and workers to bargain over, which can raise wages directly. And lower rates increase a company’s after-tax return on investment, encouraging investment relative to consumption. This helps raise capital per worker and hence boosts productivity and wages over time.
.. Britain and Canada, in particular, have shown that it is possible to substantially cut rates without meaningfully reducing corporate revenues as a proportion of GDP.
The GOP Tax Plan: Tough Choices With Limited Room to Maneuver
Republicans will likely struggle to squeeze all their priorities into a deal that allows for $1.5 trillion in tax cuts
The plan will call for driving down the corporate tax rate into the low 20% range, from 35%, according to a person familiar with the discussions. It will also likely include a doubling of the standard deduction that would benefit many individual filers, lower individual rates, fewer tax brackets and sharply reduced rates for “pass-through” business owners who pay tax on business income through their individual returns.
.. Republicans also have said they want to eliminate the estate tax, repeal the alternative minimum tax, expand write-offs for business investments and reduce taxes on U.S. corporate foreign profits.
.. the Republicans’ wish list will likely add up to more than $5 trillion worth of tax cuts over a decade
Politicians, Promises, and Getting Real
both stories raise the question of how much, if at all, policy clarity matters for politicians’ ability to win elections and, maybe more important, to govern.
About elections: The fact that Trump is in the White House suggests that politicians can get away with telling voters just about anything that sounds good. After all, Trump promised to cut taxes, protect Social Security and Medicare from cuts, provide health insurance to all Americans and pay off the national debt, and he paid no price for the obvious inconsistency of these promises.
.. True, Republicans long paid no price for lying about Obamacare; in fact, those lies helped them take control of Congress. But when they gained control of the White House, too, so that the prospect of repealing the Affordable Care Act became real, the lies caught up with them.
.. During the campaign Trump could get away with posing as an economic populist while offering a tax plan that would add $6 trillion to the deficit, with half the benefit going to the richest 1 percent of the population. But this kind of bait-and-switch may not work once an actual bill is on the table.
.. Medicare for all is a substantively good idea. Yet actually making it happen would probably mean facing down a serious political backlash. For one thing, it would require a substantial increase in taxes. For another, it would mean telling scores of millions of Americans who get health coverage though their employers, and are generally satisfied with their coverage, that they need to give it up and accept something different. You can say that the new system would be better — but will they believe it?