President Trump and congressional Republicans are pressing ahead on a tax bill that will almost certainly include a major corporate tax cut. And they are framing their push for such a measure around the claim that workers will be the big beneficiaries of those corporate tax reductions.
The core of their argument is this: If government reduces taxes on corporations, firms will invest their higher after-tax profits in plant and equipment that will boost worker productivity and result in higher wages.
In a Sept 3 Fox News interview, Treasury Secretary Steven Mnuchin said it this way: “Most economists believe that over 70 percent of corporate taxes are paid for by the workers.” Or to put it in the context of the current tax debate, Mnuchin implied that workers would get 70% of the benefit of a corporate tax cut.
In fact, most economists don’t believe this. The issue has been studied for decades and remains a topic of intense debate. Economists have looked at empirical data and crunched the numbers based on their theoretical models. While it is hard to say what most economists think about anything, a fair reading of the literature suggests that while workers do bear some of the burden of the corporate tax, they don’t bear much. Thus, they would not benefit much from a corporate tax cut.