Trump Tax Plan: 80 Percent of Economic Gains Will End Up Going to Foreigners in 2028, Democratic Senator Says

Updated | President Donald Trump touted the economic growth triggered by his tax cuts in a speech Thursday afternoon, pointing out the projected growth of gross domestic product (GDP) over the next 10 years had increased because of the plan.

But 80 percent of the economic growth generated by the Republican tax cuts will go abroad and benefit foreigners by 2028, after individual tax cuts expire, according an analysis by Democratic Senator Chris Van Hollen of Maryland.

A Congressional Budget Office report found significant differences between projected GDP, which measures the level of production in the U.S., and gross national product, which measures the income earned by all Americans. If the economic impact from GDP is higher than GNP, the difference between the two is income generated in the United States but going to foreigners. An average 34 percent of income from the economic activity driven by the tax cuts is flowing out of the country, and in 2028, that number will increase to 80 percent. Most individual tax cuts will be phased out after 2025.

"We heard statement after statement about how this tax plan would be great for American workers but the analysis is clear," Van Hollen told Newsweek. "When this thing kicks in, 80 cents of every dollar [gained from the tax plan] will go to foreigners and not American workers. That's a stunning number."

A CBO official told Newsweek that its analysis shows a majority of the GDP growth will benefit foreigners, but they don't have an exact number.

Van Hollen brought up his calculations at a hearing this week with CBO director Keith Hall, "80 percent of the benefit of increased economic activity from the tax plan is going into the pockets of foreigners?" Van Hollen asked.

"Your calculation's right, I'm just not sure that's exactly how I'd look at the benefits of, or the impact, of the tax act," Hall replied.

President Donald Trump speaks about tax cuts during an event with American workers in the Rose Garden of the White House on April 12. SAUL LOEB/AFP/Getty Images

Nearly one-third of the U.S. stock market is owned by foreign investors, which means they're benefiting from the $238 billion increase in stock buyback authorizations since the tax law passed. An analysis of Fortune 500 companies found that corporations have spent 37 times more on stock buybacks than on American workers' bonuses and wages. "Republicans had fair warning that a huge chunk of this economic boost would flow to foreigners," said Van Hollen. "The bottom line is that foreigners own a large chunk of U.S. corporations and will get a big windfall."

At the same time, U.S. deficits are projected to balloon because of the decrease in revenue being collected under the tax cuts. The CBO projects that federal spending will exceed revenues by $804 billion in fiscal year 2018, up from $665 billion in 2017. The national debt is now on track to be 100 percent of GDP by 2028. That means the U.S. will have to borrow money to make up for its shortfalls, and much of that money will come from abroad. The small gains to GDP will be offset by increased interest payments abroad.

"That's the effect of the tax law, it provides some boost to GDP but that boost is financed by a lot of borrowing," said Chad Stone, chief economist at the left-leaning Center on Budget and Policy Priorities. "Each year's borrowing produces more income for foreigners and by the time you get to 2028 there's a fair amount of income for foreigners being generated."

Republicans have "clearly abandoned any claims of fiscal responsibility," said Van Hollen. "You're borrowing close to $2 trillion from our kids and grandkids and then you're giving it to corporations and others and at the end of the day 80 percent of the benefits of additional economic activity are going to foreigners."

Correction: This story incorrectly characterized Senator Van Hollen's analysis as that of the CBO. In fact, the CBO agrees that the majority of GDP gains will benefit foreigners, but does not have a number for the exact percentage.