CEOs agree: Corporate tax cuts won't trickle down

Despite all evidence to the contrary, Republicans continue to tout their tax bills as “middle-class tax cuts.” In reality, the bills making their way through Congress are tax cuts for the rich and big corporations, at the expense of working families.

Any crumbs thrown towards low- and middle-income families disappear at the end of 2025, and left in their place are some tax increases, not cuts. But the tax cuts for big corporations — both cutting the headline rate and giving them tax advantages to offshore profits and jobs — are permanent.

Under the Senate bill, in 2027, households making under $75,000 will see their taxes rise on average according to the Joint Committee on Taxation. And according to the Tax Policy Center, 62 percent of the benefits of the tax plan in 2027 would go to the top 1 percent — households currently making income of $730,000 or more.


The real damage to working families will come in the near future; Republicans have already signaled their plans to leverage the deficits that result from their tax plan to gut Medicaid, Medicare and Social Security.

Left with no other way to claim that the middle class wins out in these bills, proponents are claiming that the benefits to corporate tax cuts will trickle down.

The logic goes like this: Corporate tax cuts will increase after-tax profits, which will boost private savings. Higher profitability will spur firms’ incentive to invest and the new savings will make funds available to finance these new investments. These investments will in turn boost productivity which will boost workers’ wages.

This is a long chain of events that has to happen, and most of its links are pretty weak when tested against real-world data. After-tax corporate profits are already near historically high, and interest rates incredibly low, and yet investment has been weak.

Why would doing more of the same (i.e., fattening companies’ profit margins) all of a sudden reverse this trend? And even if investment picks up and boosts productivity, there is no guarantee that this will boost a typical workers’ wages.

Sky-high after-tax corporate profits and low interest rates make clear that it isn’t corporations’ profitability or insufficient available savings holding back investment. Corporations are sitting on plenty of cash, but have used that money to boost shareholder returns, not investment. Quite simply, cutting corporate taxes solves no problem currently facing the American economy.


Given this, tax cuts for corporations are just tax cuts for the rich by another name. Claims that corporate tax cuts will make it all the way down to workers’ wages are not supported by real-world evidence.

There is no evidence in recent American economic history, no evidence from international comparisons and no evidence from individual U.S. states that corporate tax cuts will boost the wages of American workers. This is a case we’ve been making for a while.

As it turns out, the CEOs of major companies agree with us. Companies including Cisco, Pfizer, Coca-Cola and Amgen have said that the gains from corporate tax cuts will go to shareholders.

When CEOs were asked at a Wall Street Journal event to raise their hands, “If the tax reform bill goes through, do you plan to increase investment — your company’s investment, capital investment,” few raised their hands.

White House National Economic Council Director Gary Cohn asked “Why aren’t the other hands up?” The hands weren’t up because the gains from corporate tax cuts will go to shareholders, not workers.

This means the gains from cutting corporate taxes will disproportionately accrue to the rich, since the top 1 percent holds about 40 percent of stock wealth.

With corporate tax claims thoroughly debunked, there is no avenue left through which the Republican tax bills can be considered anything but huge tax cuts for the rich at the expense of working families.

Hunter Blair is a budget analyst for the Economic Policy Institute, a think tank that emphasizes the needs of low- and middle-income workers in economic policy discussions. Blair specializes in tax, budget and infrastructure policy analysis.