“Workers Will Be Winners”
Economists Say — and Studies Show — American Workers Will Be Major Beneficiaries of Corporate Tax Reform Through Higher Wages
November 15, 2017
Dean of Columbia Business School Argues “Workers Will Be Winners” with Corporate Tax Reform Leading to Wage Increases
Glenn Hubbard, Dean of Columbia Business School, Says “Reducing Tax Rates, Particularly on Business Income … Raises Pay,” Meaning “Workers Will Be Winners.” “Tax reform is important, and workers will be winners … [F]undamental tax reform — reducing tax rates, particularly on business income, while broadening the tax base — raises pay …” (Glenn Hubbard, “Workers To See Benefit Of Corporate Tax Cuts In Their Wages,” The Hill, 11/6/17)
- “Why Should Workers Care About Business Tax Reform? The Simple Answer is a Wage Increase.” (Glenn Hubbard, “Workers To See Benefit Of Corporate Tax Cuts In Their Wages,” The Hill, 11/6/17)
Hubbard Explains that Cutting the Corporate Tax Rate “Increases Capital Formation, Raising Productivity and Wages.” “A cut in the corporate tax rate, all else being equal, increases capital formation, raising productivity and wages … In simple textbook models, the long-run supply of capital is very sensitive to changes in the net return to capital. Reducing the corporate tax rate increases capital, productivity and wages.” (Glenn Hubbard, “Workers To See Benefit Of Corporate Tax Cuts In Their Wages,” The Hill, 11/6/17)
- “This Prospect of a Raise Stands Out as One of the Most Significant Positive Effects Policy Can Have on the Labor Market …” (Glenn Hubbard, “Workers To See Benefit Of Corporate Tax Cuts In Their Wages,” The Hill, 11/6/17)
- Hubbard Calls Wage Increase Due to Corporate Tax Reform “A Hole-In-One.” “Economists’ technical fouls of each other on the tax basketball court make good copy. But a hole-in-one of the wage increase the CEA report describes is what should grab the attention of congressional tax writers.” (Glenn Hubbard, “Workers To See Benefit Of Corporate Tax Cuts In Their Wages,” The Hill, 11/6/17)
Harvard Economics Professor Says Corporate Tax Reform Will Increase Annual National Income Equal to $3,500 Per Family
Harvard Economics Professor Martin Feldstein Says, “[C]orporate Tax Reform … Will Lead to a Major Increase in Capital Spending By Companies. That in Turn Will Raise Productivity and Real Wages.”(Martin Feldstein, “Corporate Tax Reform Is The Key The Growth,” The Wall Street Journal, 11/5/17)
- Feldstein Says Annual National Income Increases Due to Corporate Tax Reform Will “Equal to $3,500 a Household.” “These gains start small but will grow year after year as capital flows to corporate investment in the U.S. from the rest of the world and from other parts of the U.S. economy … [A] reasonable estimate is that tax reform will raise the U.S. capital stock by $5 trillion within a decade, causing annual national income to rise by $500 billion — equal to $3,500 a household …” (Martin Feldstein, “Corporate Tax Reform Is The Key The Growth,” The Wall Street Journal, 11/5/17)
Feldstein Notes the House’s Draft Tax Reform Legislation’s “Most Important Reform” is the Corporate Tax Rate Cut. “The most important reform is to cut the corporate tax rate from 35% — the highest among major industrial nations — to 20%. This will increase corporate capital directly by reducing the tax burden. Cutting the corporate rate to 20% would raise retained earnings by about $2 trillion over 10 years.” (Martin Feldstein, “Corporate Tax Reform Is The Key The Growth,” The Wall Street Journal, 11/5/17)
- Feldstein Also Argues that Modernizing the International Tax System By Adopting a “Territorial” Regime “Will Make American Companies Bring Back Cash from Foreign Subsidiaries.” “The lower tax rate will also induce foreign companies to shift some of their production to America … This will be reinforced by reforms that induce American corporations to bring back profits earned by their foreign subsidiaries. Under the proposed reform the U.S. will follow the practice of nearly all other countries in adopting a ‘territorial’ tax system. This will make American companies bring back cash from foreign subsidiaries as it is earned.” (Martin Feldstein, “Corporate Tax Reform Is The Key The Growth,” The Wall Street Journal, 11/5/17)
- “In Addition, Tax Reform Will Help Bring Home Some of the $2.6 Trillion that U.S. Companies Already Hold Abroad Because of Today’s Unfavorable Taxation of Repatriated Profits.” (Martin Feldstein, “Corporate Tax Reform Is The Key The Growth,” The Wall Street Journal, 11/5/17)
Harvard Business School Finance Professor Notes Corporate Tax Reform “Will Serve as an Important Stimulus to the Economy” that “Will Accrue to Workers”
Mihir Desai, Harvard Business School Finance Professor Says Corporate Tax Reform in House Bill is “Well Designed” and Bring America “In Line With Global Realities.” “The dramatic changes in the corporate tax are well designed. Specifically, the combination of the lower rate, the switch to territoriality, the temporary expensing of capital investment, and the repeal of the domestic production deduction simplifies the corporate system considerably and brings the corporate tax system in line with global realities.” (Mihir Desai, “Finding The Good In The Republican Tax Plan,” Bloomberg View, 11/6/17)
- “[T]hese Changes Will Serve as an Important Stimulus to the Economy and Will Accrue to Workers …” (Mihir Desai, “Finding The Good In The Republican Tax Plan,” Bloomberg View, 11/6/17)
- “This Accomplishment is Non-Trivial and is the Best Part of the Plan.”(Mihir Desai, “Finding The Good In The Republican Tax Plan,” Bloomberg View, 11/6/17)
A Study from EY Shows that a Plan Similar to the House and Senate Tax Reform Bills Will Lead to Higher Economic Growth, After-Tax Wages, and Standard of Living
Economic Analysis from EY Shows that a Tax Reform Plan Similar to the House and Senate Bills “Would Unambiguously Raise Economic Growth Over the Short, Medium and Long-Term.” “According to EY, the AAF plan would unambiguously raise economic growth over the short, medium, and long-term, with the long-term GDP increasing by 3.1 percent. This reflects an average of the results produced by EY’s economic models. At the high end, the AAF plan could improve the economy by 4.5 percent.” (Douglas Holtz-Eakin, “Realistic Tax Reform Can Deliver Real Growth,” The Huffington Post, 11/10/17)
- The Analysis Shows a Tax Reform Plan Similar to Those Being Considered in the House and Senate Would Lead to a GDP Increase of Over 3 Percent and a Jump in After-Tax Wages. “Based on analysis performed by noted accounting firm EY, tax reform similar to that being considered by Congress would increase Gross Domestic Product (GDP) by over 3 percent — reflecting substantially higher investment — and lead to more than 7 percent higher after-tax wages for working Americans and an improved standard of living.” (Douglas Holtz-Eakin, “Realistic Tax Reform Can Deliver Real Growth,” The Huffington Post, 11/10/17)
American Action Forum’s Douglas Holtz-Eakin: Tax Reform is Essential to “Delivering Higher Growth, Better Wages for Workers, and a Higher Standard of Living for Americans.” “Sound policy reforms, beginning with tax reform, are essential to changing this outlook — delivering higher growth, better wages for workers, and a higher standard of living for Americans.” (Douglas Holtz-Eakin, “Realistic Tax Reform Can Deliver Real Growth,” The Huffington Post, 11/10/17)
Read the full EY analysis below:
The Growth Impacts of Framework-Consistent Tax Reform - AAF
An Economic Analysis from the Tax Foundation Shows Much of the Economic Growth Leading to Higher Wages Comes from Corporate Tax Reform
Tax Foundation Analysis Forecasts that the “Tax Cuts And Jobs Act” Would “Lead to a 3.7 Percent Increase in GDP Over the Long Term,” Leading to Higher Wages. According to the Tax Foundation’s Taxes and Growth Model, the plan would significantly lower marginal tax rates and the cost of capital, which would lead to a 3.7 percent increase in GDP over the long term, 2.9 percent higher wages …” (“Preliminary Details And Analysis Of The Senate’s 2017 Tax Cuts And Jobs Act,” Tax Foundation, 11/10/17)
- Tax Foundation: With “Tax Cuts and Jobs Act,” “After-Tax Incomes of All Taxpayers Would Increase By 4.4 Percent in the Long Run.”(“Preliminary Details And Analysis Of The Senate’s 2017 Tax Cuts And Jobs Act,” Tax Foundation, 11/10/17)
According to Tax Foundation Economist Nicole Kaeding, “Much of This Growth Would Come from Making the U.S. Corporate Tax More Competitive.” “Much of this growth would come from making the U.S. corporate tax more competitive. Currently, the U.S. has one of the highest statutory corporate tax rates in the world at 35 percent. Lowering the rate to 20 percent would bring America more in line with its OECD trading partners. (The average statutory rate among OECD countries is 24.18 percent.) The lower tax rate would induce firms to increase investment and expand.” (Nicole Kaeding, “A Tax Plan Worthy Of Praise,” U.S. News & World Report, 11/13/17)
Read the full Tax Foundation analysis below:
https://taxfoundation.org/details-analysis-2017-senate-tax-cuts-and-jobs-act/
