The Council of Economic Advisers (CEA) released a report estimating that cutting the corporate tax rate, as proposed in the Republican tax framework, would increase average household earnings by at least $4,000. The report has been widely criticized, for its methodology and conclusions, by a broad range of economists, academics, and policy experts.
Below is a look at what they have to say:
Lawrence Summers, former U.S. Treasury Secretary: “[T]here is no peer-reviewed support for his central claim that cutting the corporate tax rate from 35 percent to 20 percent would raise wages by $4,000 per worker…The claim is absurd on its face…if a PhD student submitted the CEA analysis as a term paper in public finance, I would be hard pressed to give it a passing grade.” [10/17/17]
Mihir Desai, Harvard Business School professor: “Recent @CEA report on corporate tax cuts misinterprets results of our (Desai Foley Hines) paper on corporate tax incidence” [10/17/17]
Joseph Stiglitz, former Chairman of the Council of Economic Advisers and Nobel recipient: “The CEA report grossly exaggerates the benefits to workers…There is a longstanding bi-partisan tradition of the CEA basing its analysis on the best research, and presenting a balanced interpretation…It is a big disappointment that this report deviates so substantially from that tradition.” [10/24/17]
Jason Furman, former Chairman of the Council of Economic Advisers: “Although the White House makes much of the importance of peer-reviewed research, their estimates of the wage effects from a cut to the corporate tax rate are based on parameters from a few papers written a decade ago, none of which were peer-reviewed, and most of which were never published.” [10/22/17]
Jared Bernstein, former Chief Economist in the Office of the Vice President: “CEA’s new report on the wage-boosting effects of the proposed cut in the corporate rate from 35 to 20 percent looks fatally flawed to me. It is a literature review that picks only the ripest of cherries, ignoring the large body of literature that goes hard in the other direction.” [10/16/17]
Howard Gleckman, Senior Fellow at the Tax Policy Center: “Hassett made some bold promises to US workers, but, based on what we know so far, the Unified Framework can’t deliver them.” [10/5/17]
Kimberly Clausing, professor at Reed College, and Edward Kleinbard, former Chief of Staff at the Joint Committee on Taxation: “[T]he work that the CEA cites in defense of its wage estimates is a group of (typically unpublished) papers that have been challenged by subsequent critiques. Their highly selective use of the literature to back their claims is unusual for the CEA, which typically adheres to rigorous standards for fact-checking and evidence.” [10/20/17]
Josh Bivens, Director of Research at the Economic Policy Institute: “This claim is clearly wrong. Economic logic and evidence argues strongly that American workers should not expect any noticeable wage boost from cutting corporate income taxes.” [10/24/17]
Martin Sullivan, Chief Economist and contributing editor for Tax Analysts’ daily and weekly publications: “The October 16 study from the Council of Economic Advisors — which I will take the liberty here to rename “The Economic Effects of a Yet Unspecified Corporate Tax Reform: Some Theory and Some Evidence” — is a classic example of how industry and partisan interests use economic analysis to give the public the impression their views are scientifically proven.” [10/19/17]
Mark Mazur, Director of the Tax Policy Center: "You'd have to have a tsunami of corporate capital coming into the United States — we've never seen that." [10/16/2017]
###
