Erik Paulsen paints a very rosy picture for “American families and hard working taxpayers across the nation” in his commentary on tax reform, in the March 15 edition of the Eden Prairie News. This is the rest of the story.
It is important to keep in mind that the tax-reform provisions related to corporations are permanent, while those affecting individual taxpayers expire in 2025. As a result many individuals will have higher paychecks in the near term, thanks to the new tax bracket levels and several increased tax credits. However, the tax bracket levels will return to their previous rates after 2025, while many tax credits will expire. Therefore, depending on one’s personal situation, taxes may increase substantially in 2026. Continue reading “Don’t be fooled by short-term gains”
The following article by Alexandra Thornton was posted on the Center for American Progress website March 1, 2018:
Credit: Getty Images
The Tax Cuts and Jobs Act (TCJA) was introduced on November 2, 2017, rushed through Congress on a partisan basis, and signed by President Donald Trump just seven weeks later. No hearings were held on the actual bill and experts who could have helped ensure that provisions were properly drafted had barely any opportunity to digest legislative language or analysis from the Congressional Joint Committee on Taxation, much less to provide comments. Additionally, Democratic legislators were not permitted in the drafting room. The result is a bill riddled with drafting errors, special tax breaks that were not vetted, and new loopholes.1 While some are mere glitches, others appear to be purposeful giveaways that will create complexity and confusion for taxpayers and will have a significant impact on federal revenues.2
Most tax policy experts understand tax reform to involve making the tax system fairer, as well as simpler and more efficient where possible.3 This is achieved in part by eliminating special interest tax breaks and loopholes that allow savvy taxpayers to legally escape tax.4 This approach contributed to the success of the Tax Reform Act of 1986.5 While it will take time before the full ramifications of the TCJA are fully revealed, it is clear at this point that the effort did not result in true tax reform. Rather, while some special interest tax breaks and tax loopholes were eliminated or reduced, a host of others were left in place. And new breaks and loopholes were added that individuals and businesses, with the help of their sophisticated tax advisers, can use to avoid paying taxes in the years ahead.6 This issue brief provides a sample of the many special tax breaks that remain or were added to the tax code, along with some new loopholes that have been identified in the two short months since the bill was passed. Continue reading “Broken Promises: More Special Interest Breaks and Loopholes Under the New Tax Law”
The following article by Ed O’Keefe was posted on the Washington Post website March 1, 2018:
House Minority Leader Nancy Pelosi (D-Calif.) has earned the ire of Republicans for suggesting that major corporations are giving workers “crumbs” while top executives reap bonuses after passage of the GOP’s tax revision plan.
But a new poll from a group supportive of President Trump finds nearly half of Americans agree with Pelosi’s comments despite weeks of relentless criticism from GOP leaders.
The following article by Matt Phillips was posted on the New York Ties website February 26, 2018:
President Trump promised that his tax cut would encourage companies to invest in factories, workers and wages, setting off a spending spree that would reinvigorate the American economy. Companies have announced plans for some of those investments. But so far, companies are using much of the money for something with a more narrow benefit: buying their own shares. Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price. But the purchases can come at the expense of investments in things like hiring, research and development and building new plants — the sort of investments that directly help the overall economy. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans. The tax overhaul is the cornerstone of Mr. Trump’s economic plan. It has been a big win for companies, offering lower corporate rates and a permanent break on overseas profits. Warren E. Buffett said in his annual letter to investors on Saturday that his company, Berkshire Hathaway, enjoyed a $29 billion gain thanks to the new tax law. Continue reading the main story RELATED COVERAGE Opinion Editorial Well-Heeled Investors Reap the Republican Tax Cut Bonanza FEB. 25, 2018 Apple, Capitalizing on New Tax Law, Plans to Bring Billions in Cash Back to U.S. JAN. 17, 2018 Bonuses Aside, Tax Law’s Trickle-Down Impact Not Yet Clear JAN. 22, 2018 Tax Overhaul Gains Public Support, Buoying Republicans Feb. 19, 2018
President Trump promised that his tax cut would encourage companies to invest in factories, workers and wages, setting off a spending spree that would reinvigorate the American economy.
Companies have announced plans for some of those investments. But so far, companies are using much of the money for something with a more narrow benefit: buying their own shares.
Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price.
But the purchases can come at the expense of investments in things like hiring, research and development and building new plants — the sort of investments that directly help the overall economy. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans.
The tax overhaul is the cornerstone of Mr. Trump’s economic plan. It has been a big win for companies, offering lower corporate rates and a permanent break on overseas profits. Warren E. Buffett said in his annual letter to investors on Saturday that his company, Berkshire Hathaway, enjoyed a $29 billion gain thanks to the new tax law.
What companies do with the trillions of dollars they’re bringing back to the United States, and the money they will save each year on their tax bills, will in large part determine whether the plan is a success or a failure.
As the tax cuts kick in, companies have laid out a variety of uses for the money. Some are paying out one-time bonuses to employees. Others are raising salaries. Others plan to open new factories.
In the fourth quarter, American companies’ investments in things like factories and business equipment grew by 6.8 percent. That was the fastest growth rate since 2014, but far from the giant surge in capital spending that was promised ahead of the tax overhaul.
But the buying back of shares is also at record levels.
Almost 100 American corporations have trumpeted such plans in the past month. American companies have announced more than $178 billion in planned buybacks — the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.
Such purchases reduce a company’s total number of outstanding shares, giving each remaining share a slightly bigger piece of the profit pie.
Cisco said this month that in response to the tax package, it would bring back to the United States $67 billion of overseas cash, using $25 billionto finance additional share repurchases. Alphabet, the parent company of Google, authorized up to $8.6 billion in stock purchases. PepsiCo announced a fresh $15 billion in planned buybacks. Chip gear maker Applied Materials disclosed plans for a $6 billion program to buy shares. Late last month, home improvement retailer Lowe’s unveiled plans for $5 billion in purchases.
On Monday, Mr. Buffett said on CNBC that Berkshire might be open to buy some of its shares. The remarks helped send Berkshire’s stock — and the broader market — higher.
More buybacks are almost certainly on the way. UBS analysts covering Apple said the iPhone maker might authorize another $30 billion in share purchases when it reports its next quarterly earnings in April. That would be on top of the $30 billion it already spends each year to buy back its shares.
“I’m expecting buybacks to get to a record for 2018,” said Howard Silverblatt, a senior index analyst with S.&P. Dow Jones Indices. “And if I’m disappointed, there’s a lot of people with me.”
The flurry of planned buybacks has been good for the stock market. Early this month, stocks were down more than 10 percent from their January peak. The prospect of companies flooding markets with “buy” orders helped the market recoup some of its losses.
The broader impact on the economy is less clear. Economists believe a rising stock market benefits the economy, helping support consumer and business confidence. But the vast majority of the billions of dollars in planned share purchases will benefit the richest 10 percent of American households, who own 84 percent of all stocks. The top 1 percent of households own about 40 percent of all stocks.
Ultimately, the effect of the rising stock market depends on how those wealthy investors use their windfall. It helps the economy more, for example, if they put the money toward productive new companies than if they invest in government bonds.
The following article by Chelsea Parsons and Scott Sargrad was posted on the Center for American Progress website February 16, 2018:
Thousands gathered for an evening vigil at Pine Trails Park in Parkland, FL, to remember those killed and injured in the February 15, 2018 shooting, in Parkland, FL. Credit: Getty/Carolyn Cole/Los Angeles
In his address to the nation the day after the massacre at Marjory Stoneman Douglas High School in Parkland, Florida, that killed 17 students and teachers and injured another 14, President Donald Trump vowed to take action, stating that he would soon hold meetings with governors and attorneys general in which “making our schools and our children safer will be our top priority.” He continued, “It is not enough to simply take actions that make us feel like we are making a difference. We must actually make that difference.” However, the president’s actions have already spoken louder than these hollow words. Just two days before the shooting, his administration released its fiscal year 2019 budget, which proposed cutting funding to crucial programs that help prevent gun violence and ensure school safety.
The following article by Eliza Schultz, Katherine Gallagher Robbins, Rejane Frederick, Silva Mathema, Connor Maxwell, Heidi Schultheis, Anusha Ravi, Leila Schochet, Leonard Scott IV and Shabab Ahmed Mirza was posted on the Center for American Progress website February 16, 2018:
Copies of President Donald Trump’s fiscal year 2019 budget sit on a table at the House Budget Committee on Capitol Hill in Washington, February 12, 2018. Credit: Getty/AFP/Saul Loeb
Immediately after President Donald Trump signed into law a tax overhaul that jacks up the deficit by $1.5 trillion—and unabashedly funnels enormous tax cuts to the nation’s millionaires, billionaires, and corporations—he and his colleagues in Congress made clear how they planned to pay for it: by slashing the very programs that help everyday people make ends meet. In February, President Trump released a budget that doubles down on his Robin Hood in reverse vision for the country. His proposals are draconian—seeking to dismantle the nation’s health care system; dramatically curtailing access to affordable housing and nutrition; and even threatening programs that Trump pledged not to touch, such as Social Security, Medicare, and Medicaid. Continue reading “Fact Sheets: President Trump’s FY 2019 Budget Harms Nearly Every Community Across the Country”
The following article by Dena Bunis was posted on the AARP website February 13, 2018:
Spending proposal slashes many health and safety net programs
Credit: Gregory Reid, Gallery Stock
President Trump unveiled his federal budget proposal Monday, which takes aim at many of the health and safety net programs that older Americans rely on. The plan sharply reduces funding for Medicare, Medicaid, Social Security Disability Insurance and food stamps.
The following article by Glenn Kessler was posted on the Washington Post website February 16, 2018:
White House officials are claiming big budget savings for a plan that sends the deficit soaring. How does that add up? It doesn’t. (Meg Kelly/The Washington Post)
“The budget represents $3 trillion in savings over the course of the 10 years. It’s the second-largest proposed reduction in spending ever, second only to last year’s budget.” — White House budget director Mick Mulvaney, briefing reporters on the 2019 budget, Feb. 12, 2018
“I know the president certainly would like to reduce the deficit and it’s one of the reasons that his budget — this budget reduced the deficit by $3 trillion, which was one of the largest in history.” — White House press secretary Sarah Huckabee Sanders, in an interview on CNN, Feb. 13
The following article by Salvador Rizzo was posted on the Washington Post website February 15, 2018:
The president has a tendency to claim credit where credit is not due — particularly when it comes to business deals. (Meg Kelly/The Washington Post)
“GM Korea company announced today that it will cease production and close its Gunsan plant in May of 2018, and they’re going to move back to Detroit. You don’t hear these things, except for the fact that Trump became president. … Also, you saw Chrysler moving from Mexico to Michigan.” —President Trump, in remarks at the White House, Feb. 13, 2018
“Because of our tax cuts, Apple is investing $350 billion in the United States. … And two days ago, ExxonMobil, in addition to many others, just announced that they are investing $50 billion in the United States. So the good news just keeps on rolling in.” —Trump, in remarks to congressional Republicans, White Sulphur Springs, W.Va., Feb. 1, 2018
The following article by Naomi Jagoda was posted on the Hill website February 11, 2018:
Senate Majority Leader Mitch McConnell (R-Ky.), left, and House Speaker Paul D. Ryan (R-Wis.). Credit: Alex Wong/Getty Images
Taxpayers are starting to see bigger paychecks as a result of the new tax law, which Republicans hope will pay off for them in the midterm elections.
Democrats warn that Republicans may be overpromising, and have expressed concerns that a number of taxpayers expecting refunds may instead end up owing the IRS money next year.
The growing paychecks reflect the new withholding guidance issued by the IRS last month following enactment of the tax law. The guidance adjusts the amounts that companies take from their employees’ paychecks for federal taxes. Continue reading “GOP praises, Dems question tax-cut boost in paychecks”
House Minority Leader Nancy Pelosi (D-Calif.) has earned the ire of Republicans for suggesting that major corporations are giving workers “crumbs” while top executives reap bonuses after passage of the GOP’s tax revision plan.
