Republicans’ corporate tax reform plan would provide a $70 billion tax cut for foreign investors each year for several years, according to a new analysis released Monday.
Steve Rosenthal, a fellow at the Tax Policy Center think tank, wrote in an article published by the journal Tax Notes on the plan advanced by President Trump and congressional Republicans that “a surprisingly large portion of this relief would end up in the pockets of foreign investors.”
The GOP tax plan would reduce corporate taxes by roughly $200 billion a year, according to previous estimates from the Tax Policy Center, partly by reducing the corporate tax rate from 35 percent to 20 percent.
But foreigners own about 35 percent of corporations through stocks or ownership of U.S. subsidiaries of multinational corporations, Rosenthal noted. Accordingly, they would be the beneficiaries of significant tax cuts.
The analysis is the latest in a back-and-forth among tax experts over the benefits of a corporate tax cut. The Trump White House has said that lowering the corporate tax rate and eliminating future taxes on foreign earnings would provide a huge wage boost to families.
The White House’s analysis, authored by Council of Economic Advisers Chairman Kevin Hassett, assumes that companies will ramp up investment in their businesses after the tax cut, especially by redirecting investment from overseas back into the U.S. Along the way, workers will get more productive and thus more valuable, allowing for higher pay. Hassett’s analysis has since been challenged by Democratic economists.
Regardless of the conclusions of that debate, any surge of investment would happen over a period of time, Rosenthal wrote. In the years immediately following the corporate tax cut, before companies made the switch to building their U.S. operations, the benefits of the tax cut would accrue to shareholders, including ones who are not Americans.
