Greenfield native and Trump adviser supports tax cuts

  • President Trump’s chief economist Kevin Hassett estimated Monday that the plan to cut corporate tax rates will cause average household incomes to jump $4,000 a year. ap file photo

For the Gazette
Sunday, October 29, 2017

The Trump administration’s argument that slashing corporate tax rates would result in an extra $4,000 more for the average U.S. household this year comes from an analysis by Greenfield native Kevin Hassett, who was confirmed last month by the Senate as the chairman of the White House Council of Economic Advisers.

Hassett, who Trump nominated in April as the chief economist, was a consultant during the administrations of George W. Bush and Bill Clinton and served as an economic adviser to Sen. John McCain and Mitt Romney.

Hassett, a 1980 Greenfield High School graduate who went on to earn degrees from Swarthmore College and the University of Pennsylvania, was a resident scholar and director of policy studies at the American Enterprise Institute. The son of John P. Hassett and the late Sylvia Hassett of Greenfield, he also taught at Columbia Business School and was an economist at the Federal Reserve Board of Governors.

Hassett was also co-author of “Dow 36,000” and author of “Bubbleology” and “Rethinking Competitiveness.”

Hassett’s prediction of a 5 percent increase was met with skepticism from tax experts and Democratic lawmakers who said the math was flawed.

Spread across every U.S. household, the White House analysis claims it would generate “conservatively” an income jump totaling $504 billion, or about $200 billion more than the revenues currently generated by the corporate income tax, according to the Associated Press.

With this new report, the White House is making a populist argument for its proposal to cut the 35 percent corporate tax rate to 20 percent. Trump has pitched his tax plan as supporting the middle class even though the details point to major companies and the wealthy as the biggest winners.

Polls suggest that voters generally frown upon the idea of cutting taxes for businesses — essentially rewarding these firms for avoiding taxes by exploiting loopholes and keeping profits overseas.

“President Trump complains about fake news — this fake math is as bad as any of the so-called fake news he has complained about,” said Senate Minority Leader Chuck Schumer, a New York Democrat. “This deliberate manipulation of numbers and facts could lead to messing up the good economy the president inherited.”

The analysis by Hassett said that the considerably lower rate would spur more investment by companies, which would then boost hiring and worker productivity.

The average income gains from the reduced rate would range from $4,000 to as high as $9,000, the administration said. Those figures, however, rely on research arguing that workers — rather than investors — would primarily benefit from the lower corporate rates.

“I would expect to see an immediate jump in wage growth,” Hassett said in a phone call with reporters, saying that the salary gains would also come in part from companies bringing back profits held overseas to avoid the relatively high U.S. tax rates.

Separate studies, including a 2012 Treasury Department analysis, found that the vast majority of any savings would go to investors, making it unlikely to push up wages as much as the administration has argued. The administration removed the 2012 analysis from the Treasury Department’s website after releasing its tax framework last month with Republican congressional leaders.

Outside economists said the income growth projected by Hassett appears to assume that workers appear to bear more than 100 percent of the burden of U.S. corporate taxes — a mathematical impossibility.