Spread out the tax cuts for best results

Steve Rosenthal with the Urban-Brookings Tax Policy Center in Washington, D.C., wrote on Oct. 23 that President Trump’s tax cut proposal of reducing the corporate tax rate will result in an annual $70 billion windfall tax savings for foreign investors.

Instead of reducing the rate by more than 42 percent in a single year (from 35 percent to 20 percent), I propose that the tax rate be reduced by approximately 10 percent per year for five years (31.5 percent in 2018; 28.4 percent in 2019; 25.6 percent in 2020; 23.1 percent in 2021.)

In the fifth year, the corporate tax rate would be 20.8 percent. During a five-year phase in period, the foreign investors’ windfall tax savings would be reduced by $137 billion.

By spreading the tax cut over five years, the federal deficit would increase by only $608 billion as opposed to $1 trillion if the entire tax cut is implemented in a single year. During this phase-in period, Congress will be able to determine if the corporate tax rate cuts really benefit middle-income taxpayers or only high-income taxpayers and foreign investors.

If not, the corporate tax cut should be rescinded to prevent the mushrooming of the federal deficit after 2022.

This story was originally published November 2, 2017 at 5:27 PM with the headline "Spread out the tax cuts for best results."