Promise: Paying For Itself
After the law was enacted, Treasury Secretary Steven Mnuchin began to assert that resulting economic growth would generate enough tax revenue for the overhaul of the tax code to pay for itself.
At the time, economists did not think that was true in any sense, and its definitely not true now, said Eric Ohrn, an assistant professor of economics at Grinnell College.
The claim has since been widely derided, as the law paid for about a fifth of itself, according to an estimate from the Congressional Budget Office.
The tax code overhaul was initially estimated to cost just under $1.5 trillion over a decade. That 10-year window, plus temporary provisions like the lowered individual rates, effectively hid the real cost of the law, some tax experts contend.
Provisions that raise revenue by limiting companies ability to write off things like losses and debt interest expenses effectively shifted those benefits past that 10-year window by allowing companies to push unused deductions to future years indefinitely, noted Steve Rosenthal, a senior fellow at the Tax Policy Center.
Last March, lawmakers rolled back some of those revenue raisers to soften the pandemics economic blow.
The TCJA was actually more costly than it appeared, said Rosenthal. Because the revenue pickups were timing gimmicks. And then those timing gimmicks were reversed as part of the Covid legislation.
The Tcja Gave Corporations An Even Bigger Tax Cut Than Originally Projected
Since the TCJA was enacted, corporate tax revenue has been down from its projected level by about one-third, even as pretax corporate profits have continued to rise toward historic highs. The main reason for the drop in corporate tax revenue is obvious: The TCJA slashed the corporate rate by 40 percent, from 35 percent to 21 percent. But the falloff in corporate revenue has been even sharper than expected.
Several months before the TCJA was enacted, the Congressional Budget Office projected that corporate tax revenues for fiscal years 2018 and 2019 would total $668 billion. In the forecast published soon after the TCJA was enacted, however, the CBO projected $519 billion in corporate tax revenue over those two yearsa $149 billion decrease. Actual corporate tax revenue over that period came in significantly lower, at $435 billiona $233 billion drop. Essentially, corporations have already received $233 billion in tax cuts, $84 billion more than the CBO projected. To put that in perspective, the federal government spent just $47 billion on Pell Grants over the past two years.
The CBOs adjusted forecasts now put the 10-year cost of corporate tax cuts at roughly $750 billion, $400 billion more than the pre-TCJA projections. That figure includes the temporary revenue from the TCJAs repatriation provision, which gave corporations steeply discounted tax rates on stockpiles of overseas profits from prior years.
Arctic National Wildlife Refuge Drilling
The Act contains provisions that would open 1.5 million acres in the Arctic National Wildlife Refuge to oil and gas drilling. This major push to include this provision in the tax bill came from Republican Senator Lisa Murkowski. The move is part of the long-running Arctic Refuge drilling controversy Republicans had attempted to allow drilling in ANWR almost 50 times. Opening the Arctic Refuge to drilling âunleashed a torrent of opposition from conservationists and scientists.â Democrats and environmentalist groups such as the Wilderness Society criticized the Republican effort.
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Robert Reich: Guess Who Benefits From Trump’s Tax Cuts
Trump and congressional Republicans are engineering the largest corporate tax cut in history in order “to restore our competitive edge,” as Trump says.
Our competitive edge? Who’s us ?
Most American corporations especially big ones that would get most of the planned corporate tax cuts have no particular allegiance to America. Their only allegiance is to their shareholders.
For years they’ve been cutting the jobs and wages of American workers in order to generate larger profits and higher share prices.
Some of these jobs have gone abroad or been outsourced to lower-paid contractors in America. Others have been automated. Most of the remaining jobs pay no more than they did four decades ago, adjusted for inflation.
When GM went public again in 2010 after being bailed out by American taxpayers, it boasted of making 43 percent of its cars in places where labor is less than $15 an houroften outside the United States. And it got its American unions to agree that new hires would be paid half the wages and benefits of its old workers.
Capital is global. Big American corporations are “American” only because they’re headquartered and legally incorporated in the United States. But they could leave at a moment’s notice. They also employ or contract with workers all over the world.
And they’re owned by shareholders all over the world.
So when taxes of “American” corporations are cut, foreign investors get a windfall.
Why Were The Individual Tax Cuts Not Made Permanent To Begin With
Procedural rules in the Senate and an unwillingness to constrain spending forced Congress to make the majority of the Tax Cuts and Jobs Act temporary.
Tax cuts for individuals, which are the largest tax cuts in the package, expire in 2025. Since Congress has already agreed to this package of tax cuts, it should be its first priority in Tax Reform 2.0 to make the entire law permanent.
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Tax Returns And Withholding
Tax filing season brings up many questions for taxpayers, such as, How big will my tax refund be? or, Will I have a balance due when I file taxes this year? Changes to withholding tables in the aftermath of the TCJA resulted in lower-than-expected refunds, but it is important to remember that decreased tax refunds do not necessarily translate to increased tax liabilities.
The chart below shows the aggregate amount of refunds returned to taxpayers in each income group through the 30th week of the filing season in 2017 and 2019. While total refunds in 2019 fell for some income groups relative to 2017, effective tax rates dropped across all income groups over the same period. This pattern is similar to tax year 2018, when aggregate refunds also fell for most income groups.
The Ballyhooed Tax Cut Bonuses Were A Mirage
Finally, recent data show that the tax bill did not lead to a meaningful increase in worker bonuses, debunking the forceful public relations campaign waged by the proponents of the tax cuts and the corporations receiving them.
Immediately following Trumps tax cut, corporations began announcing bonuses attributed to the TCJA. But new data show that this may have been nothing more than tax-motivated timing shifts. This is because corporations were able to take deductions on bonuses that they gave out in 2017 and early 2018 against the higher tax rate, making them more valuable than if they had handed the bonuses out later in the year. This created an incentive for corporations to shift up any bonuses that they planned to give out later. Now that this method of tax planning is no longer available, employers have reduced the value of bonuses, which have now fallen lower than their pre-TCJA levelsshowing that the much-hyped benefit for workers was illusory.
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Who Benefits From The Tax Cut 10 Months Later
Tweet This
In December 2017, Congress cut government revenues by passing a $1.5 trillion tax cut. Congress claimed the corporate tax cuts would benefit everyone because businesses would invest or use the tax cut to raise wages. Donald Trump tweeted TAX CUTS will increase investment in the American economy and in U.S. workers, leading to higher growth, higher wages, and more JOBS! The promise hasn’t materialized. Even Fox News, in an August 2018 poll, found Obamacare to be more popular than the tax cuts.
Here is the Fox News poll.
But so far, the cuts have not been linked to an increase in labor share or more investments. The Federal Reserve Bank of Chicagos current capital spending index indicates private business investment plans have remained in negative territory since 2015. The most certain effect of the tax cuts has been to help fuel a massive increase in the federal deficit and debt.
Buybacks are attractive because most CEO pay is directly linked to stock values and not to productive capital expansion. Increasing pay for the wealthiest Americans and reducing their taxes will boost equity values, but Americas inequality will get worse. The Economic Policy Institute documented that 2017 average compensation for the CEO of large companies increased by 17.6%. And that was before the tax cuts kicked in.
Family Lawyers That Work Well With Families
If you are separating from your spouse and you have children, of course your prime concern is the health, safety, and emotional well-being of your children. Anything that you can do to safeguard your child from mental trauma and emotional anguish is a top priority. Having a family lawyer in Cincinnati that is comfortable and experienced dealing with full families is important. Some of the steps are subtle than an attorney may take to shield a child from the separation and divorce proceedings. Anything that will keep the conversations civil and forward-looking can help. Focusing the efforts on what future outcome you and your spouse want rather than reliving past arguments or harms or wrongdoings can assist in maintaining an even-tempered, if not fully cordial, mode of communication. There are many widely-acknowledged books on the subject of helping children through divorce many are written for the divorcing parents, and many are written for the children to read themselves.
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The Tcja Tax Cuts Arent Working
One of the core arguments for the TCJAs dramatic corporate tax cuts claimed that the tax cuts would spur a boom in investments that would increase worker productivity, such as new factories or equipment. These investments would then increase economic output, and workers would be able to capture the benefit by bargaining for higher wages. But the first link in this flawed chain of reasoning has already broken. Businesses have not massively increased investment in fact, growth in nonresidential fixed investment has been on a downward trend since the beginning of 2018, just after the TCJAs passage. Part of this decrease in business investment is likely due to President Trumps ill-considered tariff policies. But experts warned of this outcome even before the enactment of the TCJA, emphasizing that corporate access to capital was in no short supply: In 2017, interest rates had been low for a decade after-tax profits were already near all-time highs and corporations had record amounts of cash on hand. There was no real indication that corporations faced serious liquidity constraints that prohibited them from making investments to begin with, or that changes in the corporate tax rate would have a major impact on investment.
Churches And Nonprofit Organizations
Employee compensation
There is a 25% excise tax on compensation paid to certain employees of churches and other tax-exempt organizations. The excise tax applies to any organization that is tax-exempt under 501 or 501, a Section 521 farmer’s cooperative, Section 527 political organizations, and organizations that have Section 115 income that is earned by performing essential government functions.
The excise tax applies to compensation paid to certain employees in excess of $1,000,000 during the year. The employees covered under this rule are the organization’s five highest-compensated employees and any employees who previous had this status after 2016. Compensation is exempt from the excise tax if the compensation is paid to medical doctors, dentists, veterinarians, nurse practitioners, and other licensed professionals providing medical or veterinary services. Compensation includes all current compensation, qualifying deferred compensation, non-qualifying deferred compensation without substantial risk of forfeiture, income under Section 457, and severance payments, but excluding Roth retirement contributions.
An organization may also be subject to the 21% excise tax if an organization has a deferred compensation plan in which benefits are spread over several years and then vest all at once. Severance payments exceeding triple an employee’s average salary during the last five years may also be subject to the 21% excise tax.
University investment tax
Unrelated business income
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Income Tax Calculator: Estimate Your Taxes
Our schools lag those of other countries , our citizens are less healthy , and Americans are unhappy . Improving our schools, health care, and well-being all require a large collective investment in the form of taxes.
One worrying trend however, is the fact that views of taxation are increasingly falling along political party lines. The breakdown between Republicans and Democrats is fairly even among income brackets until you get to incomes below $30,000, at which point more identify as Democrats. This leads me to believe that an outsized portion of low-income Republicans still believe that the present federal tax system is very or moderately fair.
This comes into conflict with the reams of data available to show that the system is, after all, not fair. Income inequality is widening to record levels and theres no reason to believe the trend will slow down.
The Tax Cuts and Jobs Act of 2017 was the largest tax overhaul in over three decades. It was rushed through congress and its working exactly as it was intended to do so: to line the pockets of the wealthy at the expense of the working class. Optically, it was championed as a way to boost the economy, but the fact is that unemployment was already low and the cuts came amidst a long bull market.
If nothing else, its clear that theres a taxation problem in America and the current solution is only making it worse.
Promise: A Level Playing Field
A businesss tax rate depends on, among other things, its structure.
Most businesses are structured as pass-through or flow-through entities, with the owners facing individual tax rates and no tax on the entities themselves.
On the surface, dropping the corporate tax rate to 21% from 35% while only lowering the top individual rate to 37% from 39.6% might seem unfair. So the law includes a special deduction for pass-through owners, allowing them to shield up to 20% of their income from those businesses from individual taxes.
But it isnt as simple as comparing the corporate and individual tax rates.
After a C corporations profits are taxed at the corporate rate, the remaining profits that go to shareholders get taxed at the capital gains rate, too. Depending on how much profit is doled out to those shareholders, the total rate on corporate profits could be well above the individual tax rates pass-through owners faced prior to the tax code overhaul. Thats still the case, albeit to a lesser extent, with that 20% deduction.
Just in terms of fairness, the pass-throughs still have an advantage, said Richard Prisinzano, director of policy analysis at the Penn Wharton Budget Model. Its just been diminished.
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Limited Or No Wage Impact
Corporate executives indicated that raising wages and investment were not priorities should they have additional funds due to a tax cut. A survey conducted by Bank of America-Merrill Lynch of 300 executives of major U.S. corporations asked what they would do with a corporate tax cut. The top three responses were that they would pay down debt, conduct stock buybacks, and conduct mergers. An informal survey of CEOs by Trump advisor Gary Cohn resulted in a similar response, with few hands raised in response to his request for them to do so if their company would invest more.
Former Clinton cabinet Treasury Secretary Larry Summers referred to the analysis provided by the Trump administration of its tax proposal as some combination of dishonest, incompetent, and absurd. Summers wrote that the Trump administrations central claim that cutting the corporate tax rate from 35 percent to 20 percent would raise wages by $4,000 per worker lacked peer-reviewed support and was absurd on its face.
Trump Tax Cuts Helped Billionaires Pay Less Taxes Than The Working Class In 2018
US President Donald Trump claps during a campaign rally in Rio Rancho, New Mexico, on September 16, … 2019.
For the first time in American history, the 400 wealthiest people paid a lower tax rate than any other group, according to a new study by economists Emmanuel Saez and Gabriel Zucman at the University of California, Berkeley.
The startling data was brought to light on Monday in a New York Times column, and is based on an analysis by Saez and Zucman in their new book, The Triumph Of Injustice.
Some critics of the new research say that the data is skewed, or even potentially wrong. However, the fact that the ultra-rich potentially pay a lower tax rate than the working class is a massive problem. The Trump administrations tax cuts for the wealthy highlight the fact that policy is moving in the wrong direction. Especially when theres worry of a potential recession.
Bill Gates agrees and has previously said, Theres no doubt that what we want government to do in terms of better education and better health care means that we need to collect more in taxes. And theres no doubt that as we raise taxes, we can have most of that additional money come from those who are better off… I need to pay higher taxes.
Before your palms start sweating dont worry I dont think we should raise your taxes. We are talking about the top .01%. Those who own yachts and airplanes.
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