The False Promises in President Trump’s Tax Plan - The New York Times

"Mr. Trump’s claim that tax cuts will propel economic growth and lift wages ignores the consensus view of economists, which is that multitrillion-dollar tax cuts, as envisioned by Mr. Trump, are not a stable or reliable way to do either.



The president’s claim also defies history. Wages have long stagnated, despite tax cuts in the 1980s and 2000s, while profits, shareholder returns and executive pay have soared. Profits, whether lifted by favorable economic conditions, by tax cuts or by both, have not translated into employee raises and have instead been used for other purposes. One is to buy back stock, which lifts share prices and, by extension, executive compensation. Following a huge one-off corporate tax cut in 2004, big piles of corporate cash were also used to pay dividends to shareholders, settle legal issues and finance severance packages for layoffs.



Of all the ways that corporations have spent their profits recently, business investment has generally been low on the list. Higher wages have been even lower, if they make the list at all. It would be foolish to expect anything different if a new set of tax cuts increased corporations’ already healthy profits. Any advantages for middle-class Americans would amount to crumbs from the banquet table.



Then, too, there is the budget issue. Mr. Trump has proposed cutting the top corporate rate from 35 percent to 15 percent, a point he emphasized on Wednesday despite warnings from his economic advisers that a cut that sizable would cause the deficit to explode. Separately, he and his advisers have also proposed ending taxation on the foreign profits of American corporations, even though such profits are often actually earned in the United States and simply relabeled as foreign through the use of complex accounting maneuvers.



Proposed tax breaks for working people, in contrast, include relatively modest reductions in tax rates, a more generous standard deduction and tax relief for child care expenses. A recent analysis of Mr. Trump’s proposals by the nonpartisan Urban-Brookings Tax Policy Center generously assumed that policy makers would end popular write-offs, including the deduction for state taxes, to offset the cost of the cuts. Even then, the analysis showed that the proposed Trump tax cuts would lift after-tax income for the top 1 percent of taxpayers by at least 11.5 percent (or an average annual tax cut of $175,000), compared with a barely perceptible 1.3 percent for taxpayers in the middle (or $760 in average tax savings)."



The False Promises in President Trump’s Tax Plan - The New York Times