Trump's Tax Plan Gives $520 Billion to Wealthy Foreigners at the Expense of American Middle Class

The Republican tax reform plan fails President Donald Trump’s “America First” promise: It will give billions to foreign investors at the expense of middle-class Americans. Reuters

The Republican tax reform plan fails President Donald Trump's "America First" promise: It will give billions to foreign investors at the expense of middle-class Americans.

If the plan passes through the Senate this month, foreigners will see more money than all middle-income households in the United States combined. That's because foreign investors now own more than $6.5 trillion worth of U.S. equity and investment fund shares, and about 35 percent of all U.S. corporate stock, according to data from the Tax Policy Center. The GOP plan will lower corporate tax rates to 20 percent, benefiting foreign investors at the cost of at least $52 billion each year, or $520 billion over the next decade.

"This is a direct transfer of wealth from the American middle class to foreign investors," Senator Chris Van Hollen, the Democrat from Maryland, told Newsweek. "It's totally backwards. This provides a huge tax windfall to wealthy foreign stockholders, paid for by middle class American households."

Foreigners may be getting a better deal than Americans as the increase in asset values would largely be tax-free to foreign investors, while U.S. investors would likely pay a tax of 23.8 percent on dividends and long-term gains.

The White House claims slashing corporate tax rates from 35 to 20 percent will eventually create $4,000 more per year in income for American households. The math behind these calculations has been widely questioned, even by some White House economists, who said the benefits won't reach the middle class for three to five years.

Republican reasoning also assumes businesses will pass their savings on to employees. But some CEOs are actively telling the government they'll use the money to benefit shareholders instead. The heads of top U.S. companies like Cisco Systems, Pfizer and Coca-Cola have publicly stated they will pass their gains from tax cuts to shareholders through dividend increases and buybacks rather than send them to employees.

U.S. corporations are already hoarding more than $1.84 trillion, according to Moody's. Adding to that cash stockpile is unlikely to incentivize them to hire more labor.

The deficit-financed cuts would benefit foreign investors immediately, but future generations of taxpayers will eventually pay the prices, Van Hollen said. In order to pay for the $1.4 trillion in debt that the tax bill would create, Republicans are going to have to "cut Medicare and Medicaid, as well as the whole portion of the budget that funds education and other important programs," he said.

"This is the worst tax deal I've ever seen," Steven Rosenthal, a senior fellow at the Tax Policy Center, told Newsweek. "This is money off the table that we will never get back. Foreign investors will not be around when Social Security and Medicare run out of money."

It's a tough pill to swallow for the president and party that say they're putting American workers first. "These days the White House is a fact-free zone when it comes to economics," Van Hollen said. "They're determined to pass tax cuts for the wealthy and corporations even at the expense of most Americans."

A vote on the Senate bill is expected to come Wednesday evening or by the end of the week.