Republican presidential nominee Donald Trump’s proposal to lower the U.S. corporate tax rate from 21% to 15% would disproportionately harm the bottom half of the nation’s income distribution while benefiting those at the top, according to a Thursday analysis by economists at American University.
The analysis, released just over a month before the November 5 election, examines the potential economic and distributional effects of tax policies proposed by Trump and Vice President Kamala Harris, the Democratic nominee. Harris has proposed raising the corporate tax rate to 28%.
If enacted, the economists found, Trump’s plan would “modestly reduce” the nation’s gross domestic product (GDP), decrease government revenue, and “significantly increase inequality” since wealthier households, who primarily own corporate stocks, would gain the most from the tax cuts.
The analysis estimates that the “share of national income going to the top 5% would increase by around 1.6%, while the share of the bottom 50% would fall by about 4.8%.”
Harris’ plan, in contrast, would “mildly” boost GDP, raise federal revenue, and “decrease inequality.” It would reduce the income share of the top 5% by roughly 1% and increase the income share of the bottom 50% by about 4.7% compared to current policy.
This analysis follows a Congressional Budget Office report showing that the wealthiest 1% of Americans saw their share of the nation’s wealth rise to 27% between 1989 and 2022, while families in the bottom half held just 6% of the wealth during both years. Cutting corporate taxes further would widen this gap.
Trump’s call for a 15% corporate tax rate was the “centerpiece” of a speech he gave last month at the Economic Club of New York, as Bloomberg reported.
When Trump took office in 2017, the corporate tax rate stood at 35%. Later that year, Trump and congressional Republicans passed a controversial tax-cut package that slashed the rate to 21%, resulting in a surge in tax avoidance. The law primarily benefited the wealthy, offering little to the working class.
A recent analysis by the Center for American Progress Action Fund found that cutting the corporate tax rate to 15% would deliver around $50 billion in annual tax breaks to the 100 largest and most profitable U.S. companies.
