Corporate tax cuts are a politically charged issue. Conservatives claim that most of the benefits of cutting corporate tax rates flowed to workers, while Bernie Sanders and those to the left of center claim the tax cuts were a gift to the rich. So, who’s right? It turns out the answer is more nuanced than the politicians would have you believe.  Workers were supposed to benefit from both increased employment and increased pay. We are now in the ninth year of reduced corporate taxes and there is a considerable amount of data available to test that theory.   According to the Tax Foundation, unincorporated businesses, who comprise over 90% of the American businesses, employed about 55% of private sector workers in 2015. Last February, the Tax Foundation published an updated study indicating that passthrough entities (which are not taxed as corporations) currently employ about 60% of private sector workers.  According to the Bureau of Labor Statistics, the U.S. economy added approximately 14.5 million net new private-sector jobs between January 2018 and mid-2026. Passthrough entities created a majority (approximately 8.5 to 9 million) of those jobs.   Under the tax law changes enacted by the 2017 Tax Cuts and Jobs Act, passthrough entities generally did not enjoy the same level of tax benefits that corporations did, but their share of private sector workers still grew faster than that of corporations. The industries that created the majority of new jobs are health care, social assistance and hospitality.  For a variety of tax and non-tax reasons, these industries operate in a passthrough format.  Since 1990, about 80% of new jobs have been created by passthrough entities. After 2017, that percentage dropped to about 60%-65%, so there is a reasonable assertion that the corporate tax cuts stimulated corporate job creation somewhat.  Economists are divided as to whether the TCJA increased the pace of job creation after 2017. Monthly job creation for 2018-2019 decreased by about 10% from the period 2011-2017. Average post-pandemic monthly job creation is about 20%-25% lower than it was in 2011-2017.  However, depending on the economic models used, conclusions about the TCJA impact on job creation vary. Several economic studies concluded it is difficult to discern whether the TCJA had a significant impact. However, the Federal Reserve Bank of Dallas suggested that the TCJA broadly accelerated job growth by 1%-1.3% without specifically measuring the impact of corporate tax cuts. If so, then job creation, relative to 2011-2017, would likely have been worse without the TCJA.  The impact of corporate tax cuts on pay increases is somewhat simpler to determine based on available statistical data.  Studies by economists working for the Congressional Joint Committee on Taxation and the Federal Reserve concluded that the corporate tax savings for the period 2018-2023 went primarily to corporate shareholders and highly compensated individuals as follows:  • 11% went to top corporate executives in the form of increased compensation. (For public companies, this is no surprise because Wall Street wants to see an alignment of executive compensation with the shareholders’ interests.)  • 40% went to high-income workers who were not top executives, but were already positioned above the 90th percentile of earners within their firms.  • A de minimis amount ( • 49% went to shareholders in the form of increased dividends and shareholder buyouts.   One other expected benefit of the corporate tax cuts was that corporations would increase employment by investing the tax savings in capacity building. The data with respect to that is inconclusive as corporate entities’ investments apparently were comparable to those of passthrough businesses.  Generally, tax savings were reinvested by businesses who manufacture goods, while service sector businesses tended to pass the tax savings onto owners, irrespective of whether they were incorporated.    There is one other corporate tax cut consideration affecting all of us — the impact on our national debt. Back in 2017, the Congressional Budget Office estimated that the tax cuts would reduce tax collections, thereby increasing the national debt by about $1.3 trillion between 2018 and 2027.  Those supporting the corporate tax cuts complained that this estimate ignored the impact of economic growth, which would result in an offsetting revenue increase. They seemingly have a point as 2017 corporate tax collections of $290 billion grew to $425 billion in 2025. While this sounds impressive, corporate tax collections did not keep pace with economic growth until 2024.   If all of this sounds wonky, it is. That is why politicians are able to parse data and make claims supporting their political viewpoint. Hopefully the above information will help you conclude whether corporate tax cuts are worthwhile.   Jim de Bree is a semi-retired CPA who resides in Valencia.  The post Jim de Bree | Do Corporate Tax Cuts Really Benefit Workers? appeared first on Santa Clarita Valley Signal. ...read more read less