Posted February 10, 2019 05:59:38The Trump administration is making a push to make a more significant impact on the American economy with new proposals to slash the corporate tax rate from 35 percent to 15 percent, the latest example of its plans to remake the American tax code.
The new tax cuts for companies would be phased in over the next two years and take effect Jan. 1, 2020.
That means the plan would not apply to most businesses, including some that have already filed their returns and are paying tax in the current year.
The administration has also proposed an increase in the corporate rate from 20 percent to 25 percent, which it has called the “middle-class tax cut.”
But many of the proposed tax cuts would fall hardest on small businesses.
The White House estimates that the tax cuts that would benefit the wealthiest Americans would raise an average of $12,000 for every employee in a small business.
Small businesses are also expected to bear the brunt of the corporate cuts, because of their lower rates.
The nonpartisan Tax Policy Center estimates that most of the $12.6 trillion in cuts would come from small businesses, and about two-thirds of the cuts would be for businesses with fewer than 50 employees.
The president has said he wants to cut taxes for corporations by 10 percent, a goal he said would be achieved by 2025.
But even if his administration’s plan succeeds in cutting corporate tax rates, the overall impact on wages and the economy would be substantial.
The tax cuts will only be effective for three years, meaning that, at best, many of them will not make a dent in the country’s long-term deficit.
The economic effects of the changes will depend on the details of how the corporate cut is structured.
But they are expected to be significant, according to a study by the conservative Tax Foundation, which has examined the tax proposals.
The group said that the corporate plan would reduce wages by $1,800 for every worker in a company, or more than 1.8 million workers.
It also found that most large companies would lose $1.2 trillion in revenue over the two-year phaseout period, which would be the equivalent of the entire federal budget deficit for the next decade.
The tax cuts could also lead to job losses, because many small businesses would be hit hardest by the cuts.
The Tax Foundation estimated that the loss of 5,000 to 10,000 jobs for small businesses in the next 10 years would be enough to cause a decline in average earnings for middle-income families.
“If we assume that the largest corporations pay no taxes on the dividends they receive from their operations, they would lose about $300 billion, and $400 billion to $500 billion, from the corporate taxes that they would pay,” said Tax Foundation President Larry Kudlow.
“These are the types of losses that would be very, very large.”