REPORT: Cutting corp tax rate will create jobs, raise wages


President Trump’s plan to reduce the corporate tax rate to 20 percent will create more than 587,000 full-time jobs, raise wages by more than 2.5 percent, and lift the GDP by 3 percent, according to a new report from the Tax Foundation.

The study found reducing the corporate tax rate to this level would help Americans at every income level, with after-tax incomes increasing by an average of $1,800.

“The most important thing that Congress and the Trump administration can do to boost economic growth, lift workers’ wages, create jobs, and make the U.S. economy more competitive globally, is reform the business-half of our tax system,” according to the report, “and one of the most critical elements of that reform is cutting the corporate tax rate.”

Cutting the corporate tax rate lowers the cost of capital, which helps companies boost their capital investments. The study also finds that economic effects would improve even more if full expensing were allowed with capital investments.

When both policies of full expensing and cutting the corporate tax rate are implemented, the study projects that 861,000 jobs will be created, the GDP will increase by 4.5 percent, wages will increase by 3.8 percent and after-tax incomes by an average of $2,664.

“Some might question how a corporate tax cut could create that many jobs while the economy is inching toward full employment,” notes the study. “The TAG model is actually estimating the increase in the total amount of hours worked in the economy as a result of the policy change. Thus, some of those full-time equivalent hours could be filled by new workers, while others would be filled by part-time workers moving to full-time, or some idle people coming back into the workforce.”

Chris Edwards, an expert in tax policy at the Cato Institute, agreed with the Tax Foundation’s findings.

“Supply-side or pro-growth tax reform would generate more business investment, entrepreneurship, job opportunities, higher wages, and greater international competitiveness. The Republican tax plan so far would advance those goals, [and] I think, in the long run, benefit every American,” said Edwards, adding that the study is spot-on. “They are correct that in a global economy with capital mobility most of the burden of the U.S. corporate tax falls on U.S. workers.”

Edwards concluded, “This finding is centrally important to the current GOP drive to cut the corporate tax rate. Corporations are just the collection vehicles for taxes that ultimately harm tens of millions of average workers. A large corporate tax rate cut is a crucial part of tax reform this year.”

Despite the damage caused by hurricanes Harvey and Irma, Commerce Department data released Friday shows that the U.S. economy expanded at a faster pace than was forecast in the third quarter.

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