The Treasury Department has removed from its website an economic study that directly undermines a key part of the GOP tax plan that Secretary Steven Mnuchin has been peddling on almost every morning show since before the plan was even announced.
Under the proposed GOP plan, the corporate tax rate would be slashed from 35 to 20 percent, constituting a 15 percent reduction.
The study, published in 2012 by the Office of Tax Analysis, found that workers only bear (or benefit from) 18 percent of the cost of corporate taxes, compared to 82 percent for corporate owners. This appears to be the general consensus among economists. As the Wall Street Journal notes, the bipartisan Joint Committee on Taxation and Congressional Budget Office (CBO) found that the corporate tax burden is 75 percent, versus 25 percent for workers.
A Treasury Department spokeswoman told the Journal that the department pulled the study from its website because it was “dated analysis from the previous administration” and “doesn’t represent [their] current thinking and analysis.” Other economic papers from the Obama administration, however, are still available on the department’s website.
Lowering the corporate tax rate to match other industrialized countries is something Republicans in Congress have advocated for a while, arguing that when corporations have more cash that isn’t tied up in taxes, they will use that money for more jobs and higher wages. However, multiple studies have shown that this isn’t the case.
The Center on Budget and Policy Priorities has estimated that shareholders and CEOs will benefit the most from Trump’s corporate tax cut and may wind up leaving workers worse off. Additionally, the CBO has concluded that workers only pay 25 percent of the corporate tax burden.
There is also concern over what some tax experts are calling a “Trump tax loophole.” The White House’s plan creates a special provision for “pass-through” businesses (like LLCs and partnerships). These businesses currently don’t pay the corporate tax rate — rather their owners pay taxes on their share of the business’s profits at their own personal tax rate. The new provision would cap the rate on income from pass-through businesses at 25 percent, creating a concern that owners could re-characterize their income to receive that special 25 percent rate instead of paying the top income tax rate, which will be 35 percent under the Trump tax proposal.
The administration is promoting this tax plan as “designed with the middle class in mind,” but that argument is difficult to make when some of the wealthiest Americans will likely receive some of the biggest tax cuts from the plan. Tax cuts for wealthy individuals tend to spur less growth than those targeted toward the poor or middle class. That situation is worsened for the middle class when tax cuts directed toward the rich are paired with cuts in public spending that help the working class, which is exactly what the White House plan proposes.