On Wednesday President Donald Trump will address a group of working class people in Harrisburg, Pennsylvania he thinks will benefit the most from his proposed tax plan: American truckers.
“Nothing gets done in America without the hard working men and women of the trucking industry,” Trump will say in his speech, according to an administration official. “When your trucks are moving America is growing…That is why my administration is taking historic steps to remove the barriers that slow you down.”
The president will argue his tax plan will help middle class workers like American truckers, even though the nonpartisan Tax Policy Center found in a recent study of the Trump-GOP tax plan that in 2018, taxpayers in the top 1 percent, would receive roughly 53 percent of the total tax benefit and their after-tax income would increase an average of 8.5 percent. Meanwhile, taxpayers in the bottom 95 percent would see average after-tax incomes increase between 0.5 and 1.2 percent. And by 2027, the top 1 percent would get nearly 80 percent of tax cuts.
In his speech the president will make a new claim: his plan will raise the average salary of an American family by four thousand dollars.
“We will eliminate the penalty on returning future earnings back to the United States and we will impose a one-time low tax on money currently parked overseas so it can be brought back home to America,” Trump is expected to say in Pennsylvania. “Council of Economic Advisers estimates that this change alone would likely give the typical American household a four thousand dollar pay raise.”
This calculation is likely to have been made by Kevin Hassett, who chairs the president’s Council of Economic Advisers and authored the book “Dow 36,000.” Hassett has argued recently that wages have stagnated because a majority of corporate profits are overseas to avoid paying high U.S. taxes. This estimate, however, assumes corporations would put their newly freed up cash back into the hands of workers in the form of higher wages, rather than invest in automation or return that money back to investors in the form of stock dividends, which many economists argue will likely happen.
Multiple studies have suggested that cutting taxes for corporations does not help American workers.
According to an administration official, the president believes the elimination of the estate tax will help truckers who want to pass down a family business to another family member. The Tax Policy Center, however, found that only roughly 50 small business and small farm estates nationwide will face any estate tax in 2017, owing on average less than 6% of their value in tax. Trump himself would see a $4 billion dollar tax cut if the estate tax were eliminated, if he is worth $10 billion, as he claims.
Another provision of the tax plan Trump will claim helps workers is seen as a gigantic loophole and handout to wealthy Americans.
The Trump-GOP tax plan creates a 25 percent tax rate for “pass-through” corporations, which Trump usually describes as “small businesses.” Pass-through corporations include LLCs, hedge funds, and law firms, not exactly the small businesses one thinks of when they think of the trucking industry.
Trump will argue that this new provision will lower rates for truckers who own a small businesses, however, most LLCs and true small business owners don’t make enough to pay more than 25 percent in taxes. A business owner would need to have more than $91,900 in taxable income to pay more than 25 percent, so this lowered rate for “small businesses” wouldn’t do much for most truckers.
This effectively becomes a loophole for the wealthy and well-connected because it creates an opportunity for the owners of pass-through corporations, who pay taxes on their share of the profits from the business at their own personal rate, to re-characterize their income to in order receive this special low rate.
It is worth mentioning that Trump himself owns more than 500 pass-through business entities.