Kevin Hassett, who leads the U.S. Council of Economic Advisers and is President Donald Trump’s top economist, issued a report in which he predicts that corporate tax cuts being pushed by Republicans would increase a typical household’s income by between three and seven thousand dollars a year.
Trump endorsed a framework tax proposal that would reduce the top corporate rate to 20 from 36 percent, The New York Times reports. Many economists said that the administration’s claims were overly optimistic. According to Trump and the Council, the proposal would give the typical American household a 4,000 pay raise.
The Monday report is the Council’s first published study on the potential effects of the tax proposal, but it does not attempt to analyze the full Republican proposal and it focuses on the reduction in the top corporate income tax rate.
Hasset predicts that the gains for the households would be larger because America’s broken corporate tax system creates incentives for firms to hold their profits outside the borders of the country. If the corporate rate is reduced, than the companies will be encouraged to invest in domestic machinery, computers and other equipment that will help workers produce more for the same time, stands in the report. Hassett thinks that the increase of the productivity will bring bigger salaries for the workers.
There are researchers who doubt that the companies would use the saved money for their workers. Less than a fifth of the corporate tax falls on workers, a 2012 Treasury Department study found. According to last month report of the Congressional Research Service, the effects of corporate taxes fell on rich Americans, not average people.