Slash to corporate rate a hard sell
President Trump’s team is working overtime to convince Americans that the Republican tax reform plans, which tilt decidedly toward lowering rates for businesses, will be a boon for middleclass families.
The message for the most part has failed to take hold outside Republican conference rooms on Capitol Hill. Even some hard-core Trump supporters aren’t buying it.
“Maybe Republicans aren’t making that case strong enough,” Heritage Foundation tax policy analyst Stephen Moore told The Washington Times.
“A business tax cut is a middle-class tax cut,” he said. “The whole reason we want to cut the business taxes is to benefit workers so that there are more jobs, higher wages, more companies come back to the United States. It’s all about making the American economy more competitive, which benefits the middle class.”
Mr. Moore helped write Mr. Trump’s tax plan during the presidential campaign. The original proposal included a deeper cut to the corporate rate and bigger reductions across tax brackets for individuals. Those cuts added up to about $3 trillion in lost revenue and needed to be trimmed and reshaped to fit into the $1.5 trillion hole congressional Republicans allowed in the budget.
Mr. Trump originally proposed reducing the corporate rate from 35 percent to 15 percent. He insisted that the House and Senate give him at least a 20 percent rate.
As a result, the House Republican bill gave more than 70 percent of the $1.4 trillion in tax cuts to business and the Senate Republican bill gave nearly 60 percent, according to an analysis by The Times.
The business tax cuts include the 20 percent rate for corporations and a cut in the rate paid by small businesses that file through the individual side of the tax code.
Republicans say those business tax cuts will end up helping average Americans too.
A typical family with an income of about $60,000 would get a tax cut of $1,182 under the House bill, Republicans said. But adding in higher wages from an economy supercharged by lower taxes and reaching 3.5 percent growth, an average middle-income household would get an extra $1,400, raising their after-tax income by nearly $2,600.
“I always viewed the business tax cut as the heart and soul of this plan,” Mr. Moore said.
Regardless, corporate rate cuts are not popular among voters. Just 35 percent of American voters who have seen, read or heard about the tax plan support cutting the corporate tax rate, according to a Morning Consult/Politico poll.
A Reuters/Ipsos poll found that only 8 percent of Americans believe the tax reforms will benefit the middle class. About 32 percent said the wealthy will benefit the most and 14 percent said U.S. corporations will benefit the most, according to the poll.
Mr. Trump signaled that he wanted bigger tax cuts on the individual side. In a tweet while traveling in Asia, he suggested adding a repeal of the Obamacare mandate to buy health insurance in the tax reform bill to pay for more cuts.
The Congressional Budget Office