Tax Bill Analysis: Companies’ tax cuts would favor upper-income earners

Story Highlights Companies that pay less than $20,000 in taxable income would lose

15% of S&P 500 companies will pay no tax under proposal

47% of the top 5% income earners would see a tax increase

Among companies that pay more than $100,000 in taxable income, 39% would pay more

WASHINGTON, D.C. — The proposed corporate tax cut approved by the U.S. House of Representatives earlier this week would hit about 70% of the S&P 500 companies and 45% of the top 10% of total U.S. income earners, according to a new analysis by Bloomberg. The analysis is based on total S&P 500 companies, which include companies that pay less than $20,000 in taxable income and those that pay more than $100,000.

Nearly 90% of the S&P 500 companies would pay more as a result of the tax cut, compared with the current 36%. Half of the companies in the top 10% income earners would pay more, versus 22% today. The impact on the top 1% of income earners would be about 14% in tax hikes, up from 7%.

The analysis also found that 15% of S&P 500 companies would have no tax hit. The legislation passed the House on Wednesday largely mirrored the version passed by the Senate. The bill, which is in the works of reconciling differences with the Senate bill, will now be sent to President Donald Trump for his signature.

Top earners likely to pay more, regardless of corporate tax rate

The chart below provides a point-by-point comparison of the corporate and income tax rates currently in place for different income groups. Some companies may benefit from a lower tax rate, but the data suggest most would pay more. Those who pay less in taxable income, as a result of the bill, would likely see their tax liability go up despite their low income tax rate. That’s because the corporate tax is a tax on corporate profits, while the tax on income — either business income or personal income — is based on taxable income.

To show how the corporate tax cut impacts lower- and middle-income families, the numbers show that 47% of the top 5% of income earners would see an income tax increase under the Republican plan.

Opposition to the tax cut proposals by Democrats and other business groups such as the U.S. Chamber of Commerce has centered on the burden it would place on corporations and workers. The newly released analysis appears to confirm that that the bill would make a tax cut the wealthy would get a lot richer, while the majority of Americans would be left struggling to make ends meet.

Major portions of the bill, which would reduce the corporate tax rate from 35% to 20%, passed by a vote of 227-205 on Thursday.

Tax debate ongoing

Controversy is certain to follow the GOP legislation as it progresses through Congress. House Republicans may try to revise the bill to pay for the cut, which would add $1.5 trillion to the national debt over 10 years. Democrats say the bill would be a giveaway to the rich and corporations that needs to be offset by cuts to middle- and low-income families, among other things.

The original Senate bill did require that 10% of the cuts to companies be offset by a tax on the pass-through entities, such as S-corporations and partnerships, where a typical wage earner pays his or her taxes. The House version did not require such offsetting taxes, so the question now centers on whether lawmakers will choose to approve a tax bill that is more expensive.

Subscribe to our newsletter and receive a weekly selection of the best pieces from CNNMoney on your inbox.

Leave a Comment