Why The GOP Tax Plan May Not Generate A $4,000 'Raise' For American Families The White House's estimate of gains for the average American family rests on a lot of assumptions and is disputed by economists on the right and left alike.
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Why You Shouldn't Count On The Promised $4,000 'Raise' From GOP Tax Plan

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Why You Shouldn't Count On The Promised $4,000 'Raise' From GOP Tax Plan

Why You Shouldn't Count On The Promised $4,000 'Raise' From GOP Tax Plan

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ARI SHAPIRO, HOST:

There's not yet a bill for the Republican plan to overhaul the tax code. But the White House already has one of its main talking points. This week, press secretary Sarah Huckabee Sanders tweeted that American households would get what she called a $4,000 raise from the plan. NPR political reporter Danielle Kurtzleben has been digging into this number, what it means and how realistic it is. And she's here with us in the studio to tell us about what she's learned. Hi, Danielle.

DANIELLE KURTZLEBEN, BYLINE: Hey, Ari.

SHAPIRO: So an extra $4,000 would be a big deal for a lot of American families. You report, though, that households should not count on this kind of a raise. Why not?

KURTZLEBEN: Right. So we can't exactly fact-check a prediction. But here's what I can tell you. There are several reasons to doubt this figure. And this is tax policy. And that means it's complicated.

SHAPIRO: Well, lay it out for us.

KURTZLEBEN: All right. So in a recent report, the White House's Council of Economic Advisers said this - if we cut the corporate tax rate from 35 percent to 20 percent - that it will help workers. The basic idea here is that when a company pays taxes, some of that burden gets passed on to workers, resulting in lower wages. So a higher tax bill ends up resulting in lower wages. Likewise, a lower tax bill would result in higher wages for workers. But here's the important thing. Economists disagree widely on how much of a business's corporate tax burden is eventually passed on to workers.

SHAPIRO: So how'd the White House get this specific number, $4,000?

KURTZLEBEN: Right. So to reach that $4,000 figure, the White House looked at a range of estimates but then relied on one particular one to do the math. And that ended up showing that the average household in one year would end up getting more than $4,000 in income. Incidentally, not only that, but the White House says that that $4,000 is a conservative estimate. They also said the actual figure could go as high as $9,000 per household.

But there are other economists with other estimates. And, in fact, until very recently, the Treasury Department's website included a paper saying the corporations really don't pass all that much of their tax bills onto their workers, at least not as much as this White House says they do. And, incidentally, that paper recently disappeared from the Treasury Department's website.

SHAPIRO: Well, can a corporate tax cut end up helping average workers?

KURTZLEBEN: Yes, absolutely. That's not a stretch. But the question is how much. I mean, look, even some right-leaning economists would argue that the White House is being overly optimistic in its math here. One critique they have is about fiscal discipline - that a tax cut that grows the deficit in a big way, as this plan very well might, could eventually hurt overall economic growth.

And, of course, there's some criticism from the left. Some economists there say, you know, look, if you really want to give working-class people more money, just give them a tax cut instead of hoping and assuming that corporations will pass, you know, more money on to workers. And, by the way, we don't know exactly yet who would pay what rate under a new GOP plan.

But the important thing to remember here is this - we're only talking right now about the corporate part of the tax overhaul. That's what this $4,000 figure refers to. Whatever Congress ends up doing is going to be broader than that. It's going to be about individual rates, deductions - that sort of thing.

SHAPIRO: And it seems like even when we do have a specific plan from Congress, the answer to this question - will the $4,000 raise be real? - won't be known until the bill ultimately passes, if it passes.

KURTZLEBEN: Absolutely. And it will take some time. It's not going to happen immediately. These things take time to work into the system.

SHAPIRO: That's NPR's Danielle Kurtzleben. Thanks a lot, Danielle.

KURTZLEBEN: Yes, thank you.

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