November 28,2017

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Senate Tax Bill Delivers Stronger Growth, Higher Wages

Senate Tax Bill Will Boost Take-Home Pay, Expand the Economy

The Finance Committee tax plan will unleash economic growth. By lowering the corporate tax rate, shifting to a territorial tax system, and allowing immediate expensing, the plan encourages more investment here at home and helps keep jobs from going overseas. 

The result? 

Faster growth, more jobs and higher wages for Americans across the country. 

In fact, top economists recently wrote to Treasury Secretary Mnuchin emphasizing that the current tax plans being debated in Congress could grow the American economy by 3 to 4 percent over the long term. 

According to the Tax Foundation, pro-growth tax reform could translate to $1.26 trillion in federal revenues, meaning a bulk of the plan’s cost would be offset. 

And, while there is some debate on the extent to which corporate taxes affect wages, economists across the ideological spectrum agree: workers bear a large portion of the burden of the taxes.

The non-partisan Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO) have data that show workers effectively pay one-quarter of corporate taxes. Other studies estimate workers’ bear upwards of 45 to 75 percent of the corporate tax burden. 

Growth stemming from tax reform  will have an impact on workers in the form of higher wages and better jobs. 

Last month, the Council of Economic Advisors (CEA) estimated that the average household income would increase by $4,000 annually, based on reducing the corporate tax rate to 20 percent, as is in the Senate plan. Another study by Harvard Professor and former Reagan advisor Martin Feldstein found a 20 percent corporate tax rate could deliver a wage boost of $3,500 per household annually. 

Bottom line: No matter how you slice it, the Senate tax plan will grow America’s economic pie, producing faster growth and higher wages.

11.28 economists