In a column for the New York Times, Nobel Prize-winning economist Paul Krugman exposed Donald Trump’s massive tax cut for wealthy Americans and what it also contains: a literal hand-out of billions of dollars to foreign investors.
Sarcastically calling it “Trump’s Secret Foreign Aid Program,” the columnist said the president has successfully pulled off a massive “giveaway” to the rich — including wealthy foreigners.
“Donald Trump often complains that the media don’t give him credit for his achievements. And I can think of at least one case where that’s true. As far I can tell, almost nobody is reporting that he has presided over a huge — but hidden — increase in foreign aid, the money America gives to foreigners. In fact, the hidden Trump program, currently running at around $40 billion a year, is probably the biggest giveaway to other nations since the Marshall Plan,” Krugman wrote, before pithily adding, “Unfortunately, the aid isn’t going either to poor countries or to America’s allies. Instead, it’s going to wealthy foreign investors.”
As the economist explained, “Trump’s only major legislative achievement so far is the 2017 Tax Cut and Jobs Act. The core of that bill was a sharp reduction in corporate tax rates, which has led to a drastic fall in tax revenues, on the order of $140 billion over the past year.”
“Who gains from this tax cut? Supporters of the bill claimed that the benefits would be passed on to workers in the form of higher wages, and they made a big deal over a flurry of corporate bonus announcements in early 2018,” he explained, then added that businesses took later those tax savings and ended up spending them on stock buybacks.
As he explained, “Basically, shareholders, who have received increased dividends and seen a lot of capital gains as corporations use their windfall not to invest, but to buy back their own stocks. And a big share of these gains to shareholders has gone to foreigners.”
Pointing out the global economy that exists now “in which wealthy investors normally own assets in many countries,” Krugman pointed out that “Overall, foreigners own about 35 percent of the equity in corporations subject to U.S. taxes. And as a result, foreign investors have received around 35 percent of the benefits of the tax cut. As I said, that’s more than $40 billion a year.”
Then he cut to the chase.
“Trump’s giveaway to foreign investors isn’t going to make or break us, although it’s probably enough to ensure that the tax cut will be, overall, a net drain on economic growth,” he wrote. “Still, even in America, $40 billion here, $40 billion there, and eventually you’re talking about real money. Furthermore, it does seem worth pointing out that even as Trump boasts about taking money away from foreigners, his actual policies are doing exactly the opposite.”
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