Donald Trump wants to cut the corporate income tax rate from 35 percent to 15 percent, in order to “make the United States more competitive.”
This is nonsense, for 7 reasons:
1. Profitable U.S. corporations already pay on average of only 14% according to the Government Accountability Office. That’s less than a lot of middle-class families pay. (And that’s less than half the official 35% corporate tax rate.) What’s more, some giant corporations pay little (if any) U.S. taxes because of loopholes or because they shift their profits offshore to tax havens.
2. Trump’s corporate tax cut will bust the federal budget. The nonpartisan Tax Policy Center projects it will reduce federal revenue by $2.4 trillion over 10 years. This will either require huge cuts in services for all of us, or additional taxes paid by us to pick up the corporate tab.
3. It’s based on supply-side, trickle-down nonsense. The White House says the tax cuts will create a jump in economic growth that will generate enough new revenue to wipe out any increase in the budget deficit. Rubbish. Ronald Reagan and George W. Bush both cut taxes mostly for the rich, and both ended their presidencies with huge budget deficits.
4. It will create a new special loophole for hedge fund managers, big law firms and real estate moguls like Donald Trump. They could slash the tax rate they pay on their business income from 40 percent to 15 percent. 15 percent is what a middle-class person pays. Do you think people like Trump should pay a tax rate that someone making $60,000 a year pays?
5. It creates an international race-to-the-bottom on corporate tax rates that the U.S. cannot possibly win. One of its supposed attractions is it makes U.S. corporate taxes more “competitive” internationally. But we can’t match the rates in tax havens, which are often ZERO. And other countries will just lower their taxes in response. That’s what happened after 1986, the last time the U.S. cut corporate tax rates.
6. American corporations don’t need a tax cut to be competitive. They’re already hugely competitive as measured by their profits – which are near record highs– while the share of taxes they pay are at record lows. Corporations should be doing more to pay their fair share, not getting a giant tax cut!
7. Corporations won’t use the extra profits they get from the tax cut to invest in more capacity and jobs. That’s the White House line, but it’s baloney. Corporations are now using a large portion of their profits to pay their CEOs’ hefty pay packages and to buy other companies in order to raise their stock prices. There’s no reason to suppose they’ll do any different even with more profits.
So don’t fall for Trump’s corporate tax plan. It will be a huge windfall for corporations and billionaires – like many of Trump’s own cabinet members, family members, and likely even Trump himself (although because he won’t release his taxes, we can’t tell how much he’ll enrich himself from his own tax plan).
We do know who will lose out: The rest of us.