U.S. president seeking 15 per cent reduction in income tax rate
WASHINGTON (Reuters) — The Trump administration said in an analysis released on Monday that middle-class Americans would see incomes eventually rise more than $4,000 if President Donald Trump's corporate tax cuts were enacted, seeking to counter Democratic criticisms that its tax proposals overwhelmingly benefit the rich.
The White House and top Republicans in Congress have released a framework for tax reform that lacks details but is intended to serve as a guidepost for congressional committees that are crafting tax legislation.
Trump has said he would like to see the U.S. corporate income tax rate reduced to 20 per cent from the current 35 per cent rate.
An analysis by the White House Council of Economic Advisers said lower corporate taxes would incentivize companies to invest in new machines that would require more skilled workers. Companies would then pay higher wages to these skilled workers.
Kevin Hassett, chairman of the CEA, told reporters in a conference call that those benefits would take five years to fully "phase in."
Hassett also said lower corporate rates would give companies incentives to build plants in the United States, rather than overseas.
According to the analysis, middle-class earners would see incomes rise $4,000. Under Hassett's explanation of the timing, the full increase would be realized in five years.
Fiscal policy analysts the Tax Policy Center, a nonpartisan research organization, said the overall benefits of lower corporate taxes tilt heavily toward those with higher incomes.
The Tax Policy Center said middle-income taxpayers would receive less than 10 per cent of the benefit of a corporate rate cut while the top 20 per cent would receive about 70 per cent. The top one per cent would see about one-third of the benefits and the top 0.1 per cent would get about one-fifth, the TPC has said.
Democratic lawmakers have lambasted the Trump tax plan's intended tax relief for corporations and small businesses as a giveaway for the wealthy.
Delivering the Democrats' weekly policy address on Saturday, Senator Bernie Sanders, a former 2016 presidential candidate, said Trump's budget and tax proposals were "the most destructive and unfair" in U.S. modern history.
"Donald Trump and Republicans in Congress claim that their tax plan would benefit the middle class. Nothing could be further from the truth," Sanders said.