Trump Makes Huge Tax Reform Promise But Economists Are Skeptical
The White House is actively marketing the promise that President Trump's tax plan will mean at least $4,000 more in income every year for the average household.
That figure is based on a report by Trump's chief economist Kevin Hassett, who looked at various studies to gauge how cutting the corporate tax rate to 20% from 35% today might affect workers' pay.
But before anyone reworks their budget to make way for all that new cash, here are a few things to keep in mind:
Most economists can agree that "well-designed tax changes can improve living standards over time," said Donald Marron, a former acting director of the Congressional Budget Office who now is director of economic policy initiatives at the Urban Institute.
But they part company on just how big the benefit to wages could be. In fact, it's among the most unresolved issues in economics today.
Jason Furman, who ran the Council of Economic Advisers under President Obama and is Hassett's immediate predecessor, characterized the claim that average working households might see $4,000 to $9,000 more in income every year as "wild" in a recent Wall Street Journal opinion piece.
Even an economist whose research Hassett cited in his study pushed back against the $4,000 claim as being far too high. "Cutting corporate taxes will help wages but exaggeration only serves to undercut the reasonableness of the core argument," Harvard finance professor Mihir Desai tweeted.
A lot of mainstream economists would agree. "If you just go by weight of opinion by people who think about this for a living, [the boost to income] will probably be much lower than $4,000," Marron said.