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corporate tax cuts
Analysis Shows Trump Tax Plan Would Make Rich People Richer, Working People Poorer
Economists estimated that under the GOP nominee's proposal, the "share of national income going to the top 5% would increase by around 1.6%, while the share of the bottom 50% would fall by roughly 4.8%."
Oct 03, 2024
Republican presidential nominee Donald Trump's proposal to further reduce the U.S. corporate tax rate from 21% to 15% would make the bottom half of the nation's income distribution poorer while boosting the fortunes of those at the very top, according to an analysis published Thursday by economists at American University.
The analysis, released just over a month before the high-stakes November 5 election, projects the hypothetical macroeconomic and distributional impacts of corporate tax rate plans put forth by Trump and Vice President Kamala Harris, the Democratic nominee. Harris has called for increasing the corporate tax rate to 28%.
If implemented, the economists found, Trump's plan would "modestly reduce" the nation's gross domestic product (GDP), decrease government revenue, and "significantly increase inequality," given that wealthier households "are the primary owners of corporate stocks" that would benefit from the former president's tax cuts.
The "share of national income going to the top 5% would increase by around 1.6%, while the share of the bottom 50% would fall by roughly 4.8%," the analysis estimates.
Harris' plan, by contrast, would "mildly" raise U.S. GDP, increase federal revenue, and "decrease inequality, reducing the share of income earned by the top 5% of the distribution by about 1% and increasing the share of income earned by the bottom 50% of the distribution by about 4.7%, compared to current policy."
The analysis came a day after the Congressional Budget Office released a report showing that the richest 1% saw their share of the nation's wealth grow to 27% between 1989 and 2022 while families in the bottom half of the distribution held just 6% of the country's wealth in both 1989 and 2022—a wealth gap that further slashing corporate taxes would exacerbate.
Trump's call to reduce the corporate tax rate to 15% was the "centerpiece" of an address he delivered last month at the Economic Club of New York, as Bloombergreported at the time.
When Trump took office in 2017, the statutory corporate tax rate was 35%. Later that year, Trump and congressional Republicans rammed through an unpopular tax-cut package that slashed the corporate rate to 21% and led to a surge in tax avoidance. The law has been hugely regressive, delivering major benefits to the rich and very little to the working class.
Cutting the corporate tax rate to 15% would hand roughly $50 billion in annual tax cuts to the 100 largest and most profitable U.S. companies, according to a recent analysis by the Center for American Progress Action Fund.
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GOP 'Salivating' to Ram Through Another Corporate Tax Giveaway If Trump Wins
"It's obscene," Sen. Elizabeth Warren said of Republicans' plan to hand corporations another tax cut if Trump wins in November and the GOP takes over the Senate.
Jun 10, 2024
The crowning legislative achievement of Donald Trump's first term in the White House was the passage of an unpopular tax bill that gave big corporations a massive windfall, disproportionately rewarded wealthy individuals despite being pitched as a boon for workers, and contributed trillions to the national debt.
With Trump running for another four years in power this November, Republicans are gearing up for a repeat.
The Washington Postreported Monday that "Republicans in Congress are preparing to not just extend former President Donald Trump's 2017 tax cuts if they win control of Washington in November's elections, but also lower rates even more for corporations."
"Now GOP lawmakers and some of Trump's economic advisers are considering more corporate tax breaks—whichcould expand the national debt by roughly $1 trillion over the next decade, according to researchers at Stanford University and MIT," the Post added.
The report on Republicans' plans comes a month after the Congressional Budget Office estimated that extending provisions of the 2017 tax cut law that are set to expire next year would add $4.6 trillion to the U.S. deficit.
"GOP is salivating at more handout tax cuts to their corporate bosses and billionaires that will balloon the debt," Rep. Chris Deluzio (D-Pa.) wrote on social media Monday. "Fiscal irresponsibility by the guys bought and paid for by huge corporations."
During his 2020 campaign against Trump, President Joe Biden pledged to "get rid of the bulk of" the 2017 Tax Cuts and Jobs Act (TCJA), but he and his party have thus far failed to do so.
Slashing corporate taxes even further than the 2017 law—which cut the business rate from 35% to 21%—would reward many of the same corporations that have pushed up prices for consumers in recent years in a shameless attempt to pad their bottom lines. A recent analysis by the Groundwork Collaborative found that between April and September of last year, corporate profits drove more than half of U.S. inflation.
"Big corporations raised prices higher and faster than inflation, squeezing working families to rake in record profits," Rep. Bonnie Watson Coleman (D-N.J.) wrote on social media in response to the Post's reporting. "So what's the GOP's plan? Even more corporate tax cuts and another $1 trillion to the debt. You can't make this stuff up."
Sen. Elizabeth Warren (D-Mass.) similarly criticized the GOP's plan to reward the corporations that have pushed costs onto consumers to boost their profit margins.
"The same corporations that have been price-gouging the American consumer at the grocery store, at the gas pump, and everywhere else are now spending their money loading up these Republican political action committees with the plan that the Republicans will deliver even more tax cuts," Warren told the Post on Monday. "It's obscene."
"Wealthy shareholders and executives got windfalls, workers got nothing."
Many of the country's largest, most profitable corporations already pay a tax rate that's significantly lower than the current statutory rate of 21%—if they pay any federal taxes at all.
A recent analysis by the Institute on Taxation and Economic Policy (ITEP) found that the nearly 300 companies in the Fortune 500 and S&P 500 that were consistently profitable between 2013 and 2021 saw their average effective tax rate fall from 22% to 12.8% under the Trump tax law, even as their bottom lines grew.
"The number of these corporations paying tax rates of less than 10% increased from 56 to 95 after the Trump tax law went into effect," ITEP observed.
Chuck Marr, vice president of federal tax policy at the Center on Budget and Policy Priorities, wrote in response to the Post story that "the 2017 tax law's centerpiece cut in the corporate tax rate from 35% to 21% was a complete policy failure."
"Wealthy shareholders and executives got windfalls, workers got nothing," Marr wrote, pointing to research showing that "workers below the 90th percentile of their firm's income scale—a group whose incomes were below roughly $114,000 in 2016—saw 'no change in earnings' from the rate cut" while executives saw a major boost.
Trump, who was convicted last month on 34 felony charges stemming from the falsification of business records, has not been shy about his intention to protect the wealthy and large corporations from paying their fair share in taxes.
Speaking to his rich donors at the home of billionaire hedge fund investor John Paulson in April, the former president emphasized that he would make "extending the Trump tax cuts" a top priority should he defeat Biden in November.
Andrew Bates, the Biden White House's senior deputy press secretary, noted in a memo released Monday that while Trump and his Republican allies "go to bat for the multinational corporations engaged in price gouging, they plan to slash Medicare and Social Security."
"Today's Washington Post story makes it impossible to ignore the enormous contrast between President Biden's agenda to rebuild the middle class and MAGAnomics," Bates wrote. "Republican officials who back MAGAnomics stand up for price gouging, tax giveaways for the rich, and across-the-board tariffs that would all raise prices, and they'd sell the middle class out with a skyrocketing deficit and cuts to Medicare and Social Security."
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Corporate Tax Avoidance Rampant During First 5 Years of Trump-GOP Law: Study
"Corporate tax avoidance occurs because Congress allows it to occur, and the Trump tax law made it worse," says a new study by the Institute on Taxation and Economic Policy.
Feb 29, 2024
Many large, profitable U.S. companies paid little to nothing in federal taxes during the first five years of the 2017 Trump-GOP tax law, an unpopular measure that slashed the corporate tax rate from 35% to 21% and introduced new loopholes that the rich and powerful rushed to exploit.
A study released Thursday by the Institute on Taxation and Economic Policy (ITEP) examines 342 companies that were profitable during each of the first five years of the tax law's enactment. The new research shows that corporate tax avoidance has been rampant under the law, with 23 of the companies included in the study paying nothing in federal taxes between 2018 and 2022 and 109 businesses paying nothing in at least one of the five years.
Kinder Morgan, NRG Energy, and T-Mobile were among the profitable companies that paid a 0% or negative effective tax rate during the study period.
"When President [Donald] Trump and congressional Republicans slashed the statutory corporate income tax rate from 35% to 21%, they could have maintained or even increased the effective rate paid by corporations by shutting down special breaks and loopholes in the corporate income tax," reads the new report. "But from the very beginning of the debate over the 2017 legislation, it was clear their goal was to allow corporations to contribute less to the public investments and the society that makes their profits possible."
Nearly a quarter of the companies analyzed by ITEP "paid effective tax rates in the single digits or less" during the law's first five years, including prominent corporations such as Netflix, Nike, and Citigroup.
ITEP found that the "industries enjoying the lowest five-year effective tax rates were utilities (negative 0.1%); oil, gas, and pipelines (2.0%); motor vehicles (3.2%); and telecommunications (7.7%)."
On average, the 342 companies included in the analysis paid an effective tax rate of 14.1% between 2018 and 2022—significantly less than the 21% statutory rate established by the Tax Cuts and Jobs Act.
The difference between what companies would have paid in taxes if they were held to the 21% statutory rate and what they actually paid amounts to a major taxpayer subsidy, ITEP said. The 342 companies received a combined $275 billion in subsidies during the first five years of the Trump-GOP tax law, with the majority going to just 25 companies.
Bank of America received the largest tax break of all the companies analyzed—$23.89 billion.
"For many of the biggest corporations in America, our 21% tax rate is an accounting fiction," said Matt Gardner, a senior fellow at ITEP and the lead author of the new study. "Because of an array of special-interest tax breaks, the most profitable corporations in America routinely pay effective tax rates far below the legal rate."
"It does not have to be this way. Congress should take more steps to crack down on this widespread corporate tax avoidance."
While corporate tax avoidance certainly didn't begin with the 2017 tax law, ITEP's study notes that it "did little to change" the status quo—"except to allow companies to pay less than ever."
"Corporate tax avoidance occurs because Congress allows it to occur, and the Trump tax law made it worse," the analysis says.
Some notorious tax avoiders, such as Amazon, were excluded from the study because they reported a loss during at least one of the five years that ITEP examined. Amazon paid an effective tax rate of 8.9% between 2018 and 2022.
"Americans who heard President Trump and his supporters in Congress tout the 21% corporate income tax rate they enacted in 2017 may be alarmed to hear that so many corporations pay much less than that in reality," said Steve Wamhoff, ITEP's federal policy director and report co-author. "But it does not have to be this way. Congress should take more steps to crack down on this widespread corporate tax avoidance."
The report specifically advocates a global minimum tax that would require multinational companies to pay an effective rate of at least 15%, a proposed change aimed at cracking down on profit-shifting. The Biden administration negotiated a global minimum tax deal with other nations in 2021, but the divided U.S. Congress has yet to advance the proposal.
"Drafters of the Trump tax law made some token efforts to address these problems, for example, by imposing a weak U.S. tax on certain profits that American corporations claim to earn offshore," ITEP's report observes. "This left the corporate income tax in dire need of the Biden administration's efforts to reform it."
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