July 27, 2017
July 27, 2017
Today Republican leaders in Congress and officials from the White House released a joint statement on tax reform, claiming that “the single most important action we can take to grow our economy and help the middle class get ahead is to fix our broken tax code for families, small business, and American job creators competing at home and around the globe.”
Unfortunately, the proposals they have put forward so far do not address any such goals.
Not Focused on the Middle-Class
For example, ITEP recently analyzed the tax proposals released by the Trump administration in April and found that more than 61 percent of the resulting tax cuts would go to the richest 1 percent of taxpayers. ITEP’s state-by-state estimates found that in almost every state, the richest 5 percent or even richest 1 percent of taxpayers would receive the majority of the tax cuts.
Not Designed to Help Small Businesses
The Trump tax proposals provide a 15 percent income tax rate for all businesses, including “pass-through” businesses that are not subject to the corporate income tax. Some argue that this would help “small” businesses, but many pass-through businesses are law firms and hedge funds with enormously wealthy owners, as well as huge companies like Bechtel. ITEP found that if Congress enacts Trump’s proposed 15 percent tax rate for pass-through entities, 79 percent of the benefits would go to the richest one percent of taxpayers. This is not what most people have in mind when they think of helping “small businesses.”
Not Designed to Make American Corporations More Competitive Abroad
Trump’s proposals would also lower the tax rate for corporations from 35 percent to 15 percent. Proponents argue that this is necessary to help U.S. companies “compete,” but it turns out that very few American corporations pay anything close to 35 percent of their profits in taxes. A recent study from ITEP examined the Fortune 500 companies that have been profitable each year from 2008 through 2015 and found several with effective tax rates that were close to zero or below zero for the eight-year period.
That report also found that among the subset of Fortune 500 companies reporting significant offshore profits, most paid higher taxes in the other countries where they do businesses than they pay here in the U.S. The only real explanation for lowering corporate income taxes as dramatically as Trump proposes is not to boost “competitiveness” but rather a desire to simply cut taxes for the most profitable corporations and their wealthy shareholders.