To sell his tax plan, President Donald Trump is trying a send message to ordinary Americans: that cutting corporate taxes will benefit you too. Speaking in Pennsylvania last week, Trump claimed that his current proposal — which calls for lowering corporate taxes from 35 percent to 20 percent and which allows companies to bring back overseas money at a low tax rate — will actually translate into a $4,000 pay raise for a typical American household.
The White House doubled down on the claim this week by releasing a report by its Council of Economic Advisers providing evidence to support Trump’s claim. Yet even if the claim is true, experts remain skeptical about whether it will be enough to convince regular Americans to get behind the new tax plan.
The $4,000 increase over a span of eight years is “really quite conservative” estimate, Kevin Hassett, CEA chairman, told reporters on Wednesday. According to him, the fact that U.S. corporate tax is almost 39 percent when you add state and local taxes while the global average is closer to 23 percent has "become a massive problem for America and a massive problem for America's workers."
"U.S. firms have reacted to our burdensome tax by offshoring and our high rate has discouraged foreign investment into the U.S. as well,” he said.
By lowering the corporate tax rate to 20 percent, the White House hopes to lure back some of those businesses — and as a result, according to them, increase U.S. workers’ wages.
This kind of messaging is very deliberate. The president is marketing his tax plan as a good thing for his political base because at its core lowering corporate tax is not a popular idea.
“Nobody wants to cut corporate taxes. In fact, people want to see corporations paying more, if anything,” said Seth Hanlon, a senior fellow at the Center for American Progress.
Another reason Trump’s message may not land? Many economists don’t think that corporate tax cuts will lead to higher wages.
“It’s a pretty far-fetched claim,” said Matthew Gardner of the Institute on Taxation and Economic Policy. Gardner said the corporate tax cuts would likely mean bigger payouts for shareholders, but there’s no guarantee anything would trickle down to the workers.
Plus, he said that $4,000 promise to average American households would not happen right away. “[That] $4,000 is over eight years, which would be a pretty long time for Trump’s audience to wait,” he said.
Even if the policy could benefit average Americans in the long term, they still might not support it, said Jon Krosnick, professor of psychology and political science at Stanford. “Instead, Americans — maybe in a pleasant surprise kind of way — think in terms of the best interest of the country as a whole,” he said.
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