“… companies will no longer be incentivized to offshore, and what they save in taxes should help raise corporate investment and wages.”
Kevin Hassett, the chairman of the Council of Economic Advisers, says that lowering the corporate tax rate to 20 percent, as part of President Donald Trump‘s tax reform proposal suggests, could help lift GDP by 4 percent in the first year.
The Washington Free Beacon reported:
“Speaking to the Tax Policy Center and the Tax Foundation, Hassett said the plan is pro-growth, pro-work, and will increase economic output and growth.
The plan lowers the corporate income tax rate from 35 percent to 20 percent, which will contribute to GDP growth.
In addition to slashing rates, Hassett says the framework allows corporations to write off new investment and keeps research and development and low-income housing credits. For family-owned and small businesses, the framework reduces rates to 25 percent.
“When you get more of an economic input like work, you get more economic output—and you get more economic growth,” Hassett said. “And on the corporate side, companies will no longer be incentivized to offshore, and what they save in taxes should help raise corporate investment and wages.”
Hassett points out that even former President Barack Obama proposed lowering the corporate tax rate to 28 percent. “My guess is that President Obama did not make that proposal because he thought it would have no effect.”
For individuals, the framework creates brackets of zero, 12, 25, and 35 percent, and increases the number of people who are eligible for a zero rate.
“It is scientifically indefensible to say—as the [Tax Policy Center] report of last Friday does—that the framework [would] have little macroeconomic feedback effect,” Hassett said. “It is simply inconsistent, with mountains of evidence that I am about to discuss, to have no growth effects from tax changes this significant.”
Hassett says that economists have come to a consensus that broadening the base and lower marginal tax rates boost well-being and economic growth.
“I have been in this room often over the past 20 years and have witnessed head-nodding that broadening the base and lowering the rates, as President Trump’s plan aims to do, is a recipe for better tax policy,” he said. “I can’t recall ever seeing anyone in this room argue that narrowing the base and raising rates was a recipe for growth.””