As the 2024 U.S. presidential election draws near, the economic stakes are becoming clearer, particularly when it comes to the contrasting tax policies put forth by the candidates. A new analysis by economists from American University reveals that former President Donald Trump’s proposal to cut the U.S. corporate tax rate from 21 percent to 15 percent would disproportionately benefit the wealthy while deepening income inequality for the bottom half of Americans. By contrast, Vice President Kamala Harris’s proposal to raise the corporate tax rate to 28 percent would increase government revenue, modestly boost the economy, and reduce inequality.
Released just over a month before the November 5 election, the analysis projects the macroeconomic and distributional impacts of the tax policies that each candidate has proposed. The findings are striking: Trump’s plan would result in reduced government revenue and greater inequality, with the wealthiest Americans seeing significant gains, while Harris’s proposal would generate more revenue for public programs and spread economic benefits more broadly across the population.
### Corporate tax proposals: Trump vs. Harris
Trump’s proposal to cut the corporate tax rate to 15% builds on his 2017 Tax Cuts and Jobs Act (TCJA), which reduced the rate from 35% to 21%. The TCJA has been widely criticized for disproportionately benefiting the wealthiest individuals and corporations, with limited trickle-down effects for working Americans. Trump’s new plan further slashes the corporate tax rate, a move that economists warn will exacerbate inequality.
The analysis found that Trump’s proposed cuts would deliver billions in tax relief to the largest and most profitable corporations in the country. An estimate by the Center for American Progress Action Fund suggests that the 100 largest U.S. companies would collectively receive around $50 billion annually in tax cuts under Trump’s plan.
Conversely, Harris’s plan to raise the corporate tax rate to 28% is designed to reverse the regressive effects of the 2017 tax law. By increasing corporate taxes, Harris aims to generate additional revenue for government programs, such as healthcare, education, and infrastructure, that benefit working families and the middle class. Her proposal is part of a broader effort to close tax loopholes and ensure that wealthy individuals and corporations pay their fair share.
### Key findings: Distributional impacts of Trump’s plan
The American University economists projected that Trump’s tax cuts would have a significant impact on the distribution of wealth and income in the United States. The analysis estimates that the share of national income going to the top 5% of earners would increase by around 1.6%, while the share of income going to the bottom 50% would shrink by roughly 4.8%. This shift would deepen the already stark wealth divide in the country.
According to the analysis, the primary beneficiaries of Trump’s plan would be wealthy households, who are the largest shareholders in corporations. Corporate tax cuts generally lead to higher dividends and stock buybacks, which disproportionately benefit the top 1% of earners. Working-class Americans, meanwhile, would see little to no benefit from these cuts. In fact, they may experience a reduction in essential government services if the cuts result in lower federal revenue.
### Harris’s plan: A path to greater equality
In contrast, Harris’s proposal would have the opposite effect. The analysis projects that her plan would slightly boost the nation’s gross domestic product (GDP), raise government revenue, and reduce income inequality. Under Harris’s plan, the share of income going to the bottom 50 percent would increase by about 4.7 percent, while the top 5 percent would see their income share decrease by around 1 percent. This redistribution of wealth could help bridge the widening gap between the rich and poor in the U.S.
Harris’s plan also aligns with broader Democratic efforts to make the tax code more progressive. By raising taxes on corporations and the wealthy, Harris aims to ensure that the burden of funding essential public services is shared more equitably. The additional revenue generated by her plan would be used to expand access to healthcare, improve education, and address infrastructure needs, all of which disproportionately benefit lower-income and middle-class families.
### Broader context: The wealth gap in the U.S.
The new analysis comes at a time of growing concern about wealth inequality in the United States. A report from the Congressional Budget Office (CBO) released just days before the analysis found that the richest 1 percent of Americans held 27 percent of the nation’s wealth in 2022, up from 23 percent in 1989. Meanwhile, families in the bottom half of the income distribution held just 6 percent of the country’s wealth in both 1989 and 2022. This persistent and growing wealth gap is a direct result of decades of tax policies that favor the wealthy.
Trump’s plan to further slash corporate taxes would exacerbate this problem by concentrating even more wealth at the top. By contrast, Harris’s plan represents a step toward reversing this trend and creating a more equitable economy.
### Public reactions and political implications
Trump’s corporate tax cuts have drawn sharp criticism from progressive lawmakers and economists, who argue that the benefits of the cuts have gone almost entirely to the wealthy and large corporations. Senate Budget Committee Chair Sheldon Whitehouse (D-R.I.) has been a vocal critic of Trump’s tax policies, highlighting the need for serious tax reform to address the nation’s inequality crisis.
“This report should add urgency in Congress as the Trump tax scam expires next year and we negotiate future tax legislation,” Whitehouse said. “Do we want to reward billionaires, who have already captured so much of the nation’s wealth, or do we want to de-corrupt the tax code, ensure the wealthy and big corporations pay their fair share, and reduce the deficit, all while making necessary investments to better the lives of all Americans?”
Trump’s tax cuts may provide a short-term windfall for corporations and the wealthy, but they come at the expense of working families and the broader economy. Harris’s plan, on the other hand, offers a vision of an economy where the tax code is fairer, and wealth is more evenly distributed.
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