President Trump’s tax plan gives a bigger tax cut to foreign investors than middle-class Americans, according to a new analysis from Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.
“U.S. tax reform may inevitably allow incidental benefits to foreigners. But the windfall to foreigners from lowering U.S. corporate income tax rates from 35 percent to 20 percent is exceptionally large,” Rosenthal wrote. “As estimated here, a lower corporate income tax rate would benefit foreign investors by $70 billion in the first year alone […] would benefit middle-income U.S. households by only $23 billion in the first year.”
Rosenthal’s analysis supports preliminary studies from the Tax Policy Center, which estimates that 80 percent of the tax cuts would go to the top 1 percent.
The Trump administration has pushed back against the studies, claiming it is too early to make any estimates yet. However, the administration continues to make sweeping claims of their own without providing any details.
Economists have long argued that shareholders bear the largest burden of corporate tax cuts — in other words, they receive the most benefits when these taxes are cut. The Trump administration, however, is estimating that these tax cuts will help contribute to what he calls the “biggest tax cut in history,” even going so far as to say that the average American household would see a $4,000 dollar boost in income. This estimate, however, assumes these 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.