While it has only been a year since passage of the Tax Cuts and Jobs Act (TCJA), it’s clear the law largely is both a debacle and a boondoggle. Below are the five takeaways about the legacy and continuing effect of the TCJA.
1. The Tax Cuts and Jobs Act will substantially increase income, wealth, and racial inequality.
2. The Tax Cuts and Jobs Act will continue to substantially increase the deficit.
3. The Tax Cuts and Jobs Act is not significantly boosting growth or jobs.
4. The Tax Cuts and Jobs Act continues to be very unpopular.
5. Despite the Tax Cuts and Jobs Act’s lack of popularity and ill effects, many Republican lawmakers are calling for even more tax cuts for the wealthy and corporations.
GM’s most recent quarterly financial report reveals the company has saved more than $150 million so far this year due to last year’s corporate tax cuts. So the layoffs announcement may seem especially jarring to anyone who believed President Trump’s claim that his tax cuts would spur job creation—including the Ohio residents Trump told directly “don’t sell your homes” because lost auto-making jobs “are all coming back.”
Democratic leaders have proposed rules to be adopted in the next Congress, and many of them, such as eliminating the requirement for “dynamic scoring,” are very sensible. But one of the proposed rules is problematic because it would make it harder to raise revenue.
Comparing the year’s first three quarterly filings of 2018 with those of 2017, we find that 15 of the largest Fortune 500 companies reported worldwide effective income tax rates declining by an average of 10.4 percentage points and by as much as 16 percentage points. In total these companies owed $22.3 billion less in taxes than they would have under their 2017 effective rates, saving an average of $1.5 billion each.
A newly released report by Prosperity Now and the Institution on Taxation and Economic Policy, Race, Wealth and Taxes: How the Tax Cuts and Jobs Act Supercharges the Racial Wealth Divide, finds that the TCJA not only adds unnecessary fuel to the growing problem of overall economic inequality, but also supercharges an already massive racial wealth divide to an alarming extent.
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. GOP leaders wrote the bill this way to adhere to their own rule that limits how much a piece of legislation can add to the federal debt. But it’s clear that proponents planned all along to make those provisions permanent. Less than a month after the law passed, the White House and Republican leaders began calling for a second round of tax cuts. Now, they have introduced a bill informally called “Tax Cuts 2.0” or “Tax Reform 2.0,” which would make the temporary provisions permanent. And they falsely claim that making these provisions permanent will benefit the middle class.
The idea behind the new tax break is to provide an incentive for wealthy individuals to invest in the economies of struggling communities. Despite alleged intentions, it appears opportunity zones are turning into yet another windfall for wealthy investors and may encourage displacement of people in low-income areas, working against the provision’s intended goal.
Media Contact Rep. Kevin Brady, the top tax-writer in the House of Representatives, today called on his colleagues to make permanent the temporary provisions that were enacted as part of…
Since 2000, tax cuts have reduced federal revenue by trillions of dollars and disproportionately benefited well-off households. From 2001 through 2018, significant federal tax changes have reduced revenue by $5.1 trillion, with nearly two-thirds of that flowing to the richest fifth of Americans.
The absurdity of blaming poor and moderate-income people for their circumstances is close to running its course as an effective political tool, particularly as some elected officials more boldly assert…
The nation’s corporate tax system has been dysfunctional for decades. Unfortunately, the recently enacted Tax Cuts and Jobs Act (TCJA) fails to solve fundamental problems facing the corporate tax and, in some ways, makes these problems even worse.
If you listened closely to today’s House Ways and Means Committee hearing on the Tax Cuts and Jobs Act (TCJA), you could sense that the witnesses speaking in favor of the new tax law were not 100 percent on the same page. This has been apparent ever since the law was enacted at the end of last year. The economists who speak in favor of the law (including Douglas Holtz-Eakin at today’s hearing) tend to focus on other indicators of its success. They know that the talk of bonuses and raises is nothing more than a desperate corporate PR campaign to save the law from being repealed or scaled back in the future.
The House Ways and Means Committee will hold a hearing on the Tax Cuts and Jobs Act (TCJA) Wednesday. Proponents of the law likely will use the occasion to tout its alleged economic benefits and argue that its temporary provisions should be made permanent. The title of the hearing is “Growing Our Economy and Creating Jobs,” but there is little evidence that the law does either of these things.
The Trump Administration is pushing to add or strengthen work requirements for programs that benefit low- and middle-income people but holds a different view when it comes to the wealthy. Most tax cuts enjoyed by the richest 1 percent of households under the recently enacted Tax Cuts and Job Act (TCJA) are tax cuts for unearned income.
By now, it should come as no shock that profitable Fortune 500 corporations are reaping huge benefits from the corporate tax cuts enacted last December. But as first quarter earnings reports are released, we’re learning just how big.
In 2017, the Trump Administration released a budget proposal filled with loaded language about “welfare reform” and moving able-bodied people from welfare to work. This narrative is designed to perpetuate the pernicious idea that poor people have personal shortcomings and are taking something that rightly belongs to others.
President Trump and his allies in Congress have made many wild claims about economic growth that would result from the Tax Cuts and Jobs Act. And the Congressional Budget Office just released a report revealing the TCJA will, in fact, create economic growth — for foreign investors.
Everyone pays taxes, including those who earn the least. Our collective federal, state, and local tax system includes income taxes, payroll taxes (Social Security, Medicare), property taxes, sales and other excise taxes. The total share of taxes (federal, state, and local) that Americans across the economic spectrum will pay in 2018 is roughly equal to their total share of income.
A new ITEP report estimates the impacts in every state of the much-discussed idea of extending the temporary provisions in the Tax Cuts and Jobs Act, which will expire after 2025 without further action from Congress. The report concludes that extending or making permanent these provisions would be just as skewed to the wealthy as the original law.
While rhetoric may bill this tax law and proposed extension as a middle-class tax cut, the data tell the real story: the Trump-GOP tax law was and remains a giveaway to corporations and the wealthy.
This analysis finds that extending the temporary tax provisions in 2026 would not be aimed at helping the middle-class any more than TCJA as enacted helps the middle-class in 2018.
In recent weeks, President Trump has been raking Amazon over the coals for failing to collect state and local sales taxes on many of the company’s sales—a criticism that has some merit. But a new story first reported by James Kosur at RedStateDisaster, and then picked up today by the Wall Street Journal, provides fascinating insight into the sales tax collection habits of the Trump Organization’s “official retail website,” TrumpStore.com.
The campaign by Republican leaders in Congress to promote their new tax law has two prongs. One is the claim that corporate income tax cuts are already trickling down to workers, which, as we have explained, is believed by basically no economists anywhere. The other prong of their campaign is to argue that the personal income tax cuts will provide a noticeable decline in withholding from paychecks that middle-class people will notice soon. At this point, it’s helpful to look at some actual data and see how small the boost in take-home pay will really be for most Americans.
Never one to let the truth get in the way of a good story, House Speaker Paul Ryan immediately published a press release with the headline, “ExxonMobil to Invest an Additional $50 Billion in the U.S. Due to Tax Reform.” The statement was completely faithful to ExxonMobil’s statement, except for the words “additional” and “due to tax reform.” Not to be outdone, President Trump implied during his State of the Union address that the company was investing $50 billion in response to the new tax law.
But a closer examination of ExxonMobil’s recent history of domestic spending finds that the “new” $50 billion investment is less than what the company invested over the previous five years.
Here are some claims the President made during his State of the Union address, along with the facts.
Moody’s does not believe that corporate tax cuts are trickling down to working people as bonuses and pay raises. The real problem with the corporate PR campaign is that even those economists who supported Trump’s corporate tax cut and claimed it would help workers do not believe that it works this way.
Most states piggyback on federal law to some extent for their own taxes, especially personal and corporate income taxes. These states in particular must understand what the federal changes mean for their own tax codes and decide whether to remain “coupled” to changes in the tax bill, decouple from them or take other action in response.
States’ attempts to work around the new federal tax law and ensure their residents continue to maximally benefit from state and local tax (SALT) deductions have been in the news since the beginning of the year. At a panel discussion for tax professionals in Washington Thursday, Thomas West, tax legislative counsel at the Treasury Department, cast doubt on proposed work-around schemes that would convert state income tax payments into “charitable contributions.”
The Walt Disney Corporation announced this week that in the wake of the new tax bill’s passage, it will spend $125 million on one-time bonuses and $50 million on an education program for some employees, all in 2018. This $175 million spending commitment is notable for two reasons: it’s temporary, and it’s a drop in the bucket for a company that’s likely to see annual tax savings of $1.2 billion a year and has already committed to a $50 billion-plus corporate acquisition of 21st Century Fox’s assets.
Now, Apple Inc. would like the American public to know that it has “a deep sense of responsibility to give back to our country” a small fraction of its multi-billion-dollar tax cut haul. However, the company’s splashy press release is devoid of any specifics on the jobs it will create as a result of the tax bill. Like other corporate announcements, the company’s recent proclamation of newfound patriotism should be viewed as a public relations ploy designed to convince a skeptical public that working families will see some trickle-down benefit from this historic corporate giveaway.
A bipartisan proposal in Congress to eliminate the new $10,000 cap on federal deductions for state and local taxes (SALT) would cost more than $86 billion in 2019 alone and two-thirds of the benefits would go to the richest 1 percent of households. Unfortunately, “work around” proposals in some states to allow their residents to avoid the new federal cap would likely have the same regressive effect on the overall tax code.
Last night, Yahoo reported that 81 corporations had announced pay raises and bonuses that they claim result from the Trump-GOP tax law’s reduction in the official corporate tax rate from 35 percent to 21 percent. Of these 81 corporations, 13 were included in ITEP’s most recent corporate tax study, which focuses on the Fortune 500 companies that were profitable every year from 2008 through 2015. These 13 companies had a combined effective tax rate of just 19.1 percent, which undermines the idea that the federal corporate tax rate was holding back their ability to pay workers.
Taxpayers are still learning about the intended and unintended consequences of the major tax overhaul that Republican leaders ramrodded through late last year. One little-noted provision subverts state laws that…
While many provisions targeting higher education in previous versions of the tax plan were eventually dropped, little thought has been given to how the bill still raises taxes on parents at the time they are trying to pay for college tuition.
Many Republicans who had previously claimed to be deficit hawks have been cheerfully supportive of major tax-cutting legislation as it has moved forward this fall. But one Republican Senator, Bob Corker of Tennessee, has taken a defiant stance on the issue, insisting that “passing off increased debt to future generations” would be a deal-breaker for him. When the Senate passed its version of the tax plan last week, Corker was the only Republican to vote No.
Republican leaders who rejected a proposal to have corporations pay a single percentage point higher tax rate to benefit families with children have tapped the exact same source of savings to provide more breaks for the richest 1 percent of taxpayers. The table below compares the number and share of households nationally and in all 50-states who would benefit from the proposal to reduce taxes for working families with children versus the ”compromise” to cut the top individual tax rate — below either the House or Senate version – to 37 percent for couples with incomes above $1 million.
ITEP researchers have produced new reports and analyses that look at various pieces of the tax bill, including: the share of tax cuts that will go to foreign investors; how the plans would affect the number of taxpayers that take the mortgage interest deduction or write off charitable contributions, and remaining problems with the bill in spite of proposed compromises on state and local tax deductions.
Earlier this week, ITEP explained that two possible “compromises” to improve the Senate tax bill would accomplish very little other than make the plan more expensive. Incredibly, Republican leaders are…
Parents of college students or kids in their last years of high school are more likely to face a tax hike than others under the tax legislation moving through Congress. Higher education has entered the tax debate because the House bill (but not the Senate bill) would repeal several provisions that make college and graduate education more accessible. But little thought has been given to how the tax bills would affect the parents of college students in more direct ways and make it difficult for them to finance college for their kids. If tax legislation were allowed a reasonable number of hearings and time for debate, this is exactly the sort of issue that could be addressed.
In his inaugural speech, President Trump told the world that Washington would be driven by a principle of “America First.” But the tax plans moving through Congress only put the richest Americans first. Everyone else comes after foreign investors.
Treasury Secretary Steven Mnuchin claimed for weeks that his department would release a study showing that the $1.5 trillion tax cut moving through Congress would “pay for itself.” On Monday he released a one-page memo that asserts, without evidence, that economic growth resulting from President Trump’s policies would raise enough revenue to more than offset the costs of the tax cuts.
Republicans in Congress are reported to be considering two versions of a change they claim would “improve” the current bills by making them more generous to residents of higher-taxed states. As illustrated by these estimates, the reality is that these proposals would make little difference on those states and taxpayers hit hardest.
The Senate tax bill, with or without either of the compromises that could be added to it, would shift personal income taxes away from Florida and Texas to states like California and New York, which are already paying a high share relative to their populations.
The hand-written scrawls in the margins of the hastily written 500-page Senate tax bill had barely dried when lawmakers began to reveal the true motivation behind their rush to fundamentally overhaul the nation’s tax code.
But so far, Republican leaders have demonstrated that, for them, the only voices that matter in this debate are those that fund their campaigns.
A new report from ITEP provides more details on the many breaks and loopholes for wealthy real estate investors like Trump and what a true tax reform would do to close them.
Senators Ron Johnson of Wisconsin and Steve Daines of Montana want the tax bill on the Senate floor to be amended to offer a more generous tax break for “pass-through” businesses. We have estimated how all the provisions in the tax bill would impact each income group under three possible scenarios. The only thing different in each scenario is the size of the deduction for pass-through income: 17.4 percent (the deduction in the bill as this is written), 20 percent and 27 percent. We find that the size of the pass-through break makes no difference for anyone who is not well off.
One of the findings is that every income group would face higher personal income taxes in years after 2025 (including 2027). Chained CPI would gradually push taxpayers into higher income tax brackets and make the standard deduction, the Earned Income Tax Credit, and several other breaks less generous over time. The switch to chained CPI would cause some low-income people to face a tax hike starting in 2019, the second year the plan would be in effect.
One of the more surprising findings of ITEP’s recent estimates on the Senate tax bill is that 19 states would pay more overall in federal taxes if the bill becomes law. This is not just an increase in the personal income taxes paid (which would happen in some states under the House bill). This is an increase in their net federal taxes overall, even including the assumed benefits of corporate tax cuts and estate tax cuts.
The Tax Cuts and Jobs Act, which was introduced on Nov. 2 in the House of Representatives, would raise taxes on some Americans and cut taxes on others while also providing significant savings to foreign investors.