The centerpiece of the proposed House Republican corporate tax reform is a bet that slashing the top rate from 35 percent to 20 percent will trigger an economic boom that will raise workers’ wages and goose long-term growth.
President Donald Trump on Thursday cited a study by the White House Council of Economic Advisers that the tax reform plan would boost the average worker’s annual income by $4,000.
"We will restore our competitive edge by reducing business taxes for the first time in more than 30 years," he said at the White House. "And we will bring back trillions and trillions of dollars that are now parked overseas so that money can be put to work rebuilding the United States of America as opposed to rebuilding other parts of the world."
In addition to slashing the rate, the bill would benefit businesses by allowing them for five years to write off the full cost of purchasing new equipment.
Business leaders generally praised the bill, formally known as the Tax Cuts and Jobs Act.
"Today's tax bill is a step forward that will help millions of small businesses," Job Creators Network President and CEO Alfredo Ortiz said in a prepared statement. "From simplifying accounting rules and allowing for immediate expensing to lowering tax rates, this bill will help Main Street businesses invest, grow and create bigger paychecks for American workers."
Declaring that America is "not going to be the doormat any longer," House Ways and Means Committee Chairman Kevin Brady (R-Texas) told reporters at a news conference that lower corporate taxes will make America more competitive with the rest of the world.
"We are focused on increasing paychecks in a major way. And we know that families who struggle the most have seen their paychecks leave for other countries," he said. "So we drove for a 20 percent rate so that our businesses can compete and win anywhere in the world, especially here at home."
House Majority Leader Kevin McCarthy (R-Calif.) said at the news conference that Americans would see positive signs even before the tax bill provisions take effect.
"We're going to bring back the money that is sitting overseas," he said. "Even before this bill goes into effect, I believe you're going to hear from businesses saying they want to come back to America."
House Majority Whip Steve Scalise (R-La.), who will be responsible for corralling votes for the bill, predicted it would bring tens of thousands of high-paying jobs back to the United States.
"Every time I see a company moving jobs overseas, it makes me angry," he said. "Now we can be angry, we can be mad. But today, we do something about it … Let's make America competitive again."
Stephen Moore, who helped Trump develop his tax plan as a candidate for president last year, told LifeZette that a more business-friendly tax environment could help sustain economic growth greater than 3 percent.
"The effects could be felt in the next year or two," he said. "You could certainly see a number of businesses and corporations and factories relocating back to the United States … The giant sucking sound you hear will be jobs coming back in rather than going out."
Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, said he believes supporters of the plan are overselling its potential to spark long-term growth. He said structural problems, such as slow population growth and an aging population, will restrain growth.
Even if the benefits are smaller than the advocates predict, Goldwein said, tax reform is still beneficial because "We need every decimal point [of growth] we can get."
But Goldwein added that the steep corporate tax cuts in the bill are not balanced with enough spending cuts or elimination of loopholes to make it deficit-neutral. He said the gains from tax cuts could be lost to higher debt.
"It's kind of a jump ball," he said. "I don't know which will be a more powerful factor."
But Moore said the debt problem can never be solved with economic growth rates that have been the norm during the last decade. The key metric, he said, is whether the economy grows faster than the debt. That will be much easier to achieve if the United States can add another percentage point to the rate of growth in gross domestic product, he said.
"That changes everything," he said.
Last Modified: November 3, 2017, 7:27 am