Trump: Tax plan will help create a windfall
Says tapping overseas profits means bigger paychecks for workers
The White House is convinced that a special tax break it plans to offer to entice corporations to bring back some of the estimated $2.6 trillion in profits they have sheltered in overseas tax havens will raise paychecks for average American workers.
To hear the administration tell it, corporations will invest that money in expanding plants and research in the U.S., hiring workers and driving up wages.
President Trump flew to Middletown, Pa., on Wednesday to speak to a crowd — many of them truck drivers — about his plan to repatriate corporate profits to the U.S. and the economic benefits it will create for them.
“We’ll be bringing back probably very close to 100% of the money back into our country where it can be put to work, and jobs will be created,” Trump said. “My Council of Economic Advisers estimates that this change, along with a lower tax rate, will likely give the typical American household a $4,000 pay raise.”
For that to happen, corporations would have to decide to bring back their profits, invest them in ways that increase productivity and boost the wages of workers. And that is far from guaranteed, economists say.
Kevin Hassett, chairman of the council, told a forum in Washington on Wednesday corporate profit growth used to be closely associated with wage increases for workers, but it no longer is. He blamed tax havens such as Ireland, where the corporate rate is as low as 2.4%.
But some economists, while agreeing on the need to revamp the corporate tax code, say the biggest beneficiaries of lower rates will be executives and shareholders. They say workers on average would only get 20 to 25 cents from each dollar in reduced tax and would benefit more from programs that lower the taxes they pay directly.
There is widespread agreement the tax code needs to be overhauled because companies have been able to keep money in foreign subsidiaries to avoid taxes that might otherwise be due.