Why is Donald Trump planning to give away $700 billion — that’s billion, with a “b” — to foreigners, no strings attached? You probably didn’t know that he’s planning to do this. In fact, he himself almost surely has no idea that he’s planning to do this. But it would be one clearly predictable consequence of the tax “reform” he and his congressional allies are trying to pass.
Krugman’s point being that many US equities are owned by foreigners thus a reduction in the taxation of foreign profits will flow, as a benefit, to foreigners.
OK, fair point.
For what it’s worth, the argument goes like this: Cutting corporate taxes would bring foreign capital into the United States, which would raise investment, which would increase productivity, and this productivity would then get reflected in higher wages. If this sounds like a convoluted and uncertain story, with many weak links in the supposed chain of events that ends up helping workers so much, that’s because it is.
It’s actually entirely standard reasoning on the point but still.
What this means is that around 35 percent of a tax cut from an administration that proudly uses the slogan “America first” — $700 billion over the next decade — wouldn’t even go to Americans. Instead, it would be a windfall to wealthy foreigners, who would probably gain a lot more from the tax cut than U.S. workers. Oh, and it makes all that talk about allies not paying their “fair share” sound kind of silly, doesn’t it?
Err, yes. But by lowering the tax foreigners pay we’ll raise the incentive for foreigners to invest in the US. That’s rather the logic of the point in the first place, isn’t it?