Businesses that fail to increase investment in response to President Trump’s planned tax cut would be “totally irrational” and would go out of business for not responding to a new tax climate, the White House’s top economic adviser said Friday.
“Imagine if they didn’t respond to taxes,” Council of Economic Advisers chairman Kevin Hassett said of business executives. “Then they wouldn’t be pursuing their fiduciary duty to maximize profits for their shareholders. It’d be totally irrational for them to do that. And firms that did act rationally in response to the tax code would put them out of business.”
The question came up at Friday’s press briefing in reference to an awkward moment for the administration on Tuesday. Then, White House National Economic Council director Gary Cohn was attending a Wall Street Journal CEO conference at which the executives were asked if they would increase investment in their companies if Republicans passed a tax bill. Only a smattering of hands went up, prompting Cohn to ask, “why aren’t the other hands up?”
Hassett brushed off the minor embarrassment.
“The hard evidence is people do respond,” he stated.
The centerpiece of the Republican plan is to cut the corporate tax rate from 35 percent to 20 percent.
Hassett maintains that that change alone would yield at least a $4,000 boost in annual incomes for the average family. Partly, that wage growth would occur because of additional business investment in plants and equipment. With more capital, workers can produce more, making them more valuable and thus eventually more highly paid.
