RELEASE: House GOP Tax Plan Will Primarily Benefit Corporations and the Wealthy, New CAP Report Says
Washington, D.C. — If implemented, the House Republican proposal to change the way corporations and other businesses are taxed will provide large tax cuts to corporations and the wealthy, while its ability to generate American jobs, stimulate economic growth, and increase wages is highly uncertain, a new report from the Center for American Progress says. The CAP report also casts significant doubt on proponents’ claims that the tax plan, known as the House blueprint, would create significant incentives for increased real investment in the United States; deliver an improved trade balance or eliminate corporate tax avoidance schemes; and could have adverse effects on the real incomes of many American households.
The House plan would effectively repeal the corporate income tax, change the income tax treatment of pass-through businesses, and eliminate taxes on foreign business earnings—all of which would cut business tax rates substantially—while substituting a cash flow tax with a much lower tax rate than the current corporate income tax. Such a plan would cost more than $1.3 trillion over 10 years, according to analysis by the Tax Policy Center.
“The House destination-based cash flow tax is far more complicated than claimed and could result in new types of tax avoidance. More importantly, it’s a distraction from the fact that the blueprint would provide enormous tax cuts for corporations and the wealthy that are likely to be paid for by working Americans,” said Alexandra Thornton, Senior Director of Tax Policy at CAP and co-author of the report.
“The claims of increased real investment should be viewed with great skepticism,” said Marc Jarsulic, Vice President of Economic Policy at CAP and co-author of the report. “The evidence shows that corporations are unlikely to respond to this massive giveaway with significant new investment in the United States.”
CAP’s report notes that corporate profits currently make up a large share of national income, the corporate share of total tax receipts has declined to one-third of what it was decades ago, and income inequality is very high. However, the significant cost of these tax cuts would either increase the debt, be shifted to low- and middle-income taxpayers, or lead to deep cuts in programs that are important both to maintaining a robust economy for businesses and communities and for ensuring fundamental human living standards. Any large tax cut for corporations and big pass-through businesses, such as private equity funds—whether accomplished through the existing income tax or through replacing the income tax with a cash flow tax—would have negative implications for the overall progressivity of the tax code.
While further analysis of the House tax plan—and specifically the corporate tax proposal—is warranted, CAP’s report calls for Congress to focus on ensuring that corporations and large businesses of all kinds pay their fair share of taxes. This would help to fund infrastructure, the legal system, the education system, and many other critical services that the government provides to support a vibrant economy, good jobs, and basic human living standards for all.
Click here to read “The House Republicans’ Corporate Tax Cut” by Alexandra Thornton and Marc Jarsulic.
For more information or to speak with an expert, contact Allison Preiss at firstname.lastname@example.org or 202.478.6331.