In conventional supply-side economic models, lower taxes for individuals or companies encourage the creation of investment and economic output that would otherwise never have existed. But the Trump administration’s overhaul of corporate tax may boost wages by luring investment and job creation elsewhere to get on the U.S. supply side. À la Trump doesn’t necessarily expand the global pie as conventional supply-side wisdom would require. America can just have a bigger stake in the pie.
Celebrity Democrats would raise the corporate rate if they could. Joe Biden, the alleged Democratic candidate, has refused to propose increasing the corporate tax rate to the 35 percent before Trump’s overhaul. As President Barack Obama saw, recognizing the burdens of excessive corporate tax rates, Biden suggested agreeing on 28 percent – more than today’s 21 percent. Senator Bernie Sanders advocated restoring the old 35 percent rate when it was up and running. Biden and Sanders cited a combination of fairness and inequality and deficit-based concerns to defend their positions.
However, when it comes to inequality, sound and anger have so far found no expression in the actual data. Measurements by the US Census Bureau show a decline in direct measurements of American income inequality since the new tax law was passed. Additional data suggests an acceleration in wages among the lowest-income Americans compared to their higher-income counterparts, a trend that is likely to further decrease inequality metrics.
On the deficit, the data show that corporate tax revenue has decreased since the legislation was passed. In 2019, U.S. corporation tax revenue was $ 230 billion, compared with $ 300 billion in 2016. This suggests a deficit contribution from the corporate tax revision of about $ 70 billion, or about 0.3 percent of GDP down. Although the US national debt interest rate remains near record lows, the cost of increasing the deficit can be real. Still, policies that advance the administration’s economic and national security priorities are worth the cost.
However, the case for prioritizing America’s competitiveness would remain strong even if the data confirmed critics’ concerns about inequality. The American public seems to agree with the Trump administration that protecting American jobs from overseas competition should be a higher priority for the US government than worrying which Americans do better than others.
A 2018 poll by the Pew Research Center asked Americans to identify issues that should have top foreign policy priorities. Answer # 1 was, “Take steps to protect the US from terrorism.” The second priority was “protecting the jobs of American workers”. According to a separate survey on domestic issues, the “rich and poor gap” has not proven to be a priority for more than 5 percent of Americans in at least a decade.
In the time since it was passed, economists have polled each new release of economic data to demonstrate the effects of the tax reform. Only the murmur of future data can tell the full story about whether or not the corporate tax revision worked as promised. However, questions about inequality and deficits are out of the question. The government’s goal was to improve America’s competitiveness.