Corporate tax cuts mainly help the rich

Corporate tax cuts mainly help the rich

President Donald Trump laid out the broad outlines of his plan to cut corporate taxes in a speech on Wednesday.

Number of the Day

$190 billion- Estimated economic impact of Hurricane Harvey, exceeding the economic impact of Sandy and Katrina combined. (Source: Accuweather)

President Donald Trump laid out the broad outlines of his plan to cut corporate taxes in a speech on Wednesday. The Center on Budget and Policy Priorities’ Chye-Ching Huang looks at data from the Tax Policy Center which shows that the biggest benefits would accrue to the very richest households, while many middle- and low-income earners stand to lose from the budget cuts that would inevitably result from the massive reduction in tax revenues.

If that cost is paid for through the types of spending cuts the President proposed in his 2018 budget, the vast majority of Americans would be net losers, a new TPC analysis indicates (see chart). Households in the middle fifth would lose an average of $1,500 once the costs of paying for the Trump tax cuts are counted. Nearly all — 94 percent — of these households would be “net losers,” losing more from the offsets than they’d gain from the tax cuts. Essentially every household in the bottom two-fifths of the income spectrum would be a net loser, losing an average of more than $2,000 in after-tax income. Meanwhile, the top 0.1 percent of households would gain about $935,000 each on average.

The Washington Post’s Danielle Paquette, building on an Institute for Policy Studies report, looks at the question of whether corporate tax cuts create new jobs, as supporters claim (hint: they don’t).

The president has previously proposed cutting the corporate tax rate from 35 percent to 15 percent  —  a move budget experts project would cost the country $2.4 trillion over a decade. Since the tax code is full of loopholes, most firms already pay less than 35 percent. Ninety-two companies fit that description, including AT&T and General Electric, according to the report. The research pointed out that 48 of the 92 companies got rid of jobs between 2008 and 2016, a period that includes the recession, shrinking by a combined 483,000 positions. These firms gave their top brass bigger raises, too, the data show. The average chief executive pay among the 92 companies increased 18 percent from 2008 to 2016, while S&P 500 chief executives saw a 13 percent boost.

The state of Iowa recently gave Apple Inc. an incentive package worth $208 million for a new facility that will host just 50 permanent full-time jobs. The Los Angeles Times’ Michael Hiltzik reports that the deal is only the latest example of states giving away massive amounts of tax revenue for a relatively small return.

“There is virtually no association between economic development incentives and any measure of economic performance,” urban economist Richard Florida concluded in 2012. … Another study found that, if anything, government incentives led to slower growth among the companies that received them, possibly because their managers spent more time pursuing incentives than focusing on the business, and felt less pressure to seek out nonincentive-related growth opportunities.

 

Cassidy-Graham is harmful legislation

The health care bill being pushed by Louisiana Sen. Bill Cassidy would cap and cut the Medicaid program, causing millions of Americans to lose coverage. It also would hurt middle-class entrepreneurs like Lelia Gowland, who buy coverage through the regulated insurance exchanges established under the Affordable Care Act. She shares her story in a letter to The Advocate:

What’s more, under the Cassidy-Graham bill, the state would be allowed to opt out of the ACA’s insurance regulations. This terrifies me. It would allow states to eliminate the requirement that health insurance plans cover “essential health benefits,” like the maternity care, prescription drugs, and hospitalization I — and so many others — rely on. States could also allow insurance companies to again impose annual and lifetime limits on what health insurance plans will pay for. I urge Cassidy to abandon this ill-conceived and harmful legislation and instead work with his colleagues on both sides of the political aisle to strengthen the ACA’s individual marketplaces.

 

Are things better in Texas?

Any discussion of tax policy in Louisiana inevitably ends up involving our large neighbor to the west. Texas – with better roads, greater economic diversity and an ever-growing economy – is usually touted as the model that Louisiana should follow. But how do the two states really compare? Stephanie Riegel with the Greater Baton Rouge Business Report takes a deep dive:

But do individuals pay less tax in Texas? That depends on your income level. While the spread between what you pay in Louisiana versus Texas isn’t great across the board, it’s true that higher income individuals do come out ahead under the Texas tax code, while those in lower income groups fare better in Louisiana.The difference is so little because the combined state and local tax burden for Louisiana and Texas is almost identical. No doubt each state takes dramatically different ways of getting there, but the tax-paying destination, in the end, is essentially the same.Not only that, but however you calculate it the tax rates in both states are among the lowest in the country. In other words, it’s an unsupportable argument to suggest Louisiana overtaxes its residents—or corporations—when looking at all 50 states, rather than simply glancing at our neighbor to the west.

 

Pay transparency

An Obama-era regulation required companies with more than 100 employees to confidentially provide data to the federal Equal Employment Opportunity Commission on what they pay employees by job category, sex, race and ethnicity. This week, President Donald Trump’s administration repealed the rule, effective in 2018. Valerie Wilson writes for EPI’s Working Economics Blog:

Trump administration is making it harder for employers and federal agencies to identify pay disparities and root out employment discrimination—and it will make it more difficult for working people to know when they are being discriminated against. When this rule was first announced, former Equal Employment Opportunity Commisssion Chair Jenny R. Yang stated, “Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.” By staying this rule, the Trump administration has shown that it does not value equal pay for equal work.

 

Number of the Day

$190 billion– Estimated economic impact of Hurricane Harvey, exceeding the economic impact of Sandy and Katrina combined. (Source: Accuweather)