President Donald J. Trump’s Council of Economic Advisors, released a study on Monday arguing that President Trump’s plan to cut the corporate tax rate from 35 percent to 20 percent would “very conservatively” increase average household income by $4,000 per year:
Reducing the statutory federal corporate tax rate from 35 to 20 percent would, the analysis below suggests, increase average household income in the United States by, very conservatively, $4,000 annually. The increases recur each year, and the estimated total value of corporate tax reform for the average U.S. household is therefore substantially higher than $4,000. Moreover, the broad range of results in the literature suggest that over a decade, this effect could be much larger.
Those more optimistic estimates suggest that average household income would increase by more than $9,000 per year.
According to the Council of Economic Advisors the reduction in the corporate tax rate will induce higher capital investment and increase the demand for workers and heighten their productivity.
The Hill reports that during a Sunday call with reporters CEA Chairman Kevin Hassett said the main reason why cutting the corporate tax rate would boost wages is because doing so would make it less expensive for companies to invest in capital assets such as machines.
Not everyone agrees with the CEA’s findings. Bloomberg reports that some economists suggest that corporate executives would be more inclined to use the tax windfall to increase shareholders’ dividends, or to invest in automation that could limit the need for more workers in some industries.