Director of Federal Fiscal Policy
The Washington Center for Equitable Growth’s Greg Leiserson provides must-read guides to assess the economic impacts of the 2017 tax law in a new paper and associated op-ed. He makes the following important points:
Leiserson estimates that wage rates (including benefits) would need to rise about 1 percent above what they otherwise would have been to ensure that the corporate tax cut benefits flow to workers, not shareholders. Mainstream estimates such as by the Tax Policy Center and Congressional Budget Office, however, suggest that the actual wage rate increases will range from near zero to one-third of 1 percent. Meanwhile, the 5 to 11 percent wage gain increases that the White House Council of Economic Advisers predicts are not backed by historical experience, he notes.
But, for the short run, one thing is clear, according to Leiserson: “[E]very month in which wage rates are not sharply higher than they would have been absent the legislation…is a month in which the benefits of those corporate tax cuts accrue primarily to shareholders.”
How typical workers and households fare from the law will largely depend on whether policymakers address the deficits through cuts to programs that help families afford the basics like health care and nutrition or by squeezing investments with widely shared benefits.
Indeed, if Republican lawmakers follow through with the program cuts that they’ve already proposed, most households would be net losers from the tax law, while only the highest-income households would be better off.