Should-Read: Steven Rosenthal: Foreigners Would Win Big from A Corporate Tax Cut

Should-Read: Steven Rosenthal: Foreigners Would Win Big from A Corporate Tax Cut: “The Trump Administration and congressional Republican leaders (the Big Six) have proposed a $70 billion-a-year tax cut for foreign investors…

…[Of] outstanding U.S. corporate stock… foreigners now own about 35 percent… would reap about 35 percent of the benefits of the cut in corporate taxes, which translates to around $70 billion a year.

[In] the long run… four conditions that must be met for the corporate tax cut to increase wages:  U.S. corporate tax rates must attract lots of new investment capital.  Corporations must use the money to purchase a lot of new equipment for their U.S. businesses.  All that new investment must make U.S. workers much more productive.  And, finally, that productivity growth must translate into far higher wages…. The length of the short run may be stretched… [as] a stronger dollar… discourage[s the] capital inflows from abroad that would finance new investments….

In the short run the Big Six is proposing to cut taxes for investments that have already been made, providing a windfall to existing investors, including foreign shareholders…. The recently passed Senate Budget Resolution would allow Congress to borrow $1.5 trillion to pay for coming tax cuts. Future generations of U.S. taxpayers will bear the burden of that shortfall, which could prove especially onerous on top of the $10 trillion of deficits CBO projects under current law….

Promising big corporate tax cuts, with large windfalls for foreigners, is a lot easier than enacting real tax reform.  But unless Congress changes the Big Six plan, Americans will pay a big price for a corporate tax cut—much of which would be a windfall for foreign investors…