Cutting the corporate tax rate to 20 percent, as President Donald Trump has proposed, would increase average household income by at least $4,000 a year, according to estimates in a White House study.
The study by Trump’s Council of Economic Advisers, released on Monday, says that kind of wage growth would take several years to go into effect, but it could eventually reach $9,000 a year. Other economists have previously questioned how beneficial such cuts would be for middle-income families.
The projection is based on the assumption that companies will be more inclined to invest in the U.S. with lower taxes, increasing the demand for workers and driving up wages. But some economists suggest that corporate executives would be more inclined to use a tax windfall to increase shareholders’ dividends, or to invest in automation that could limit the need for more workers in some industries.
Trump and congressional leaders last month proposed a framework for tax legislation that would cut the corporate income tax rate to 20 percent from 35 percent. The plan would also slash the tax rate on income earned by the most lucrative pass-through businesses, such as partnerships and limited liability companies. And it would condense the existing seven individual income tax brackets to three or four — leaving it up to congressional tax writers to set the top marginal rate.
AAN Staff
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