President Donald Trump added a new sweetener to his sales pitch for tax reform Wednesday, saying average Americans would benefit greatly if U.S. corporations bring money home from abroad under a special low tax rate, reports Politico.
That move, combined with lower corporate tax rates, would pump an additional $4,000 into the average annual income of American households, he said at a rally in Harrisburg, Pennsylvania.
Trump called it a "pay raise," and added it "could be a lot more than that too.
“About a $4,000 amount of money for the American family to spend, very exciting," he said.
"And you're gonna spend that money and jobs are going to be produced," he told the crowd.
Polling has shown that a cut in corporate taxes is unpopular, though there is strong support for a cut in small-business rates. So Republicans have been trying to make the case that lower corporate taxes will benefit all Americans.
Speaking to a crowd that included many truckers, Trump continued to sound that theme Wednesday.
“When companies leave our shores it’s the American workers who get hurt," he said. "We will totally eliminate the penalty for bringing earnings back into the United States.”
He was referring to trillions of dollar that U.S. companies are keeping abroad to avoid the 35 percent corporate tax rate. The tax reform "framework" recently released by the White House and Republican leaders in Congress would reduce that to 20 percent; offer companies an unspecified one-time, lower tax rate if they repatriate their profits; and exempt their foreign earnings from U.S. taxation.
The Joint Committee on Taxation, a congressional economic policy committee, estimates that nearly $3 trillion in corporate assets, some of which may include tangible items that can’t be brought back to the U.S., may be kept overseas to avoid taxation by the U.S. government.
“We will totally eliminate the penalty for bringing earnings back into the United States," Trump said.
But full details of the tax reform bill remain a work in progress, a fact that the administration itself acknowledged could lead to a different impact for the average American than the $4,000 Trump cited. That figure came from a new analysis by the Council of Economic Advisers, which is expected to release more information about the analysis on Thursday.
“The number is based on other research that modeled tax variation, and we applied those estimates to the corporate side of the Unified Framework,” DJ Nordquist, chief of staff for the CEA, wrote to POLITICO in an email. “Our research suggests the flow of wages would be $4,000 per year once the full adjustment occurs. But we need to see the final language of the bill for more precise estimates of the timing.”
Critics dismissed Trump's rosy scenario, saying corporations used a similar offshore tax "holiday" in 2004 largely for dividends, stock buybacks and executive bonuses.
“There is no evidence to suggest that a tax holiday for profits booked offshore will increase wages, create jobs or spur additional investment. History has shown otherwise," said Clark Gascoigne, deputy director of the Financial Accountability and Corporate Transparency Coalition.
The plan that congressional Republican leaders and top Trump administration released in late September called for the corporate tax rate cut; creating three individual tax brackets of 12 percent, 25 percent and 35 percent, respectively; and cutting the tax rate on unincorporated businesses, which include small businesses as well as high-earning companies, to 25 percent from a high of more than 39 percent.
Republicans hope to deliver a tax plan to Trump before the end of the year, though they continue to flesh out the plan.