Corporate tax cuts could boost shareholders’ balance sheets
Share Now on:
The corporate tax cuts included in the Republican tax bill — including a statutory corporate tax rate reduction to 21 percent from 35 percent, lower rates for pass-through businesses, elimination of the corporate alternative minimum tax and a tax holiday for repatriated profits — would deliver a windfall to many American companies. Those that are publicly traded will likely pass much of their increased after-tax revenue on to shareholders in the form of dividend distributions and share buybacks. That could likely boost stock prices overall. But it wouldn’t necessarily boost the economic prospects of most Americans. Only about 14 percent of Americans own stock directly, according to New York University economist Edward Wolff, and those asset owners are concentrated at the top of the income ladder. The top 5 percent of taxpayers earn 68 percent of dividend income and 87 percent of long-term capital gains, according to economist Kimberly Clausing at Reed College. And while 40 percent of American workers have a 401(k)-type retirement account that is invested partly in the market, Wolff points out that gains from those investments aren’t immediately available to boost people’s consumer spending or living standards.
Click the audio player above to hear the full story.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.