Paul L. Caron
Dean


Tuesday, January 21, 2020

WSJ: Did The U.S. Tax Overhaul Do What It Promised?

Wall Street Journal, Did the U.S. Tax Overhaul Do What It Promised?:

Two years after Trump’s tax cuts, a deep dive into what happened to jobs, tax revenue, corporate profits and investment.

The Tax Cuts and Jobs Act is now two years old. So what did it do?

The tax cuts themselves are easy to see: Tax bills went down for most families and corporations. Domestic retailers and banks reaped some of the biggest savings.

How the law rippled through the economy is muddier. Employment, wages and other key indicators have improved, and the 2020 economy looks stronger than projected at the start of the Trump presidency.

But many of those metrics were already on the rise before the tax law was signed by President Trump, and most economic numbers don’t show a sharp change that coincides with the tax law. Early growth in business investment seems to have faded; overall economic growth rose before pulling back again. Cross-border investment patterns have changed only modestly.

The bottom line: It seems clear the tax cuts contributed to economic growth—but not enough to pay for themselves, as many backers promised. And even some of the intended beneficiaries say the gains haven’t been dramatic. ...

For multinational corporations, the law lowered the U.S. federal rate to 21% from 35%, limited some tax breaks, made it easier to get foreign profits to shareholders and sought to make it harder for companies to benefit from very low foreign tax rates. How individual companies fared depended on their mix of foreign and domestic income, among other factors.

Isolating the tax law’s impact—to what extent it spurred investment at a time of general upswing in the U.S. economy—isn’t easy. And it wasn’t the only major economic policy change in the past few years. One of the biggest confounding factors was the trade fight that President Trump has been waging for much of his administration. ...

While Democrats say the tax law hasn’t delivered what it promised, Republicans say it is a big reason the U.S. economy is as strong as it is today.

Here’s what the data show:

  • Individuals are paying less of their income in taxes. ...
  • The change lowered tax-revenue projections. ...
  • And more revenue is coming from individuals. ...
  • Lower tax rates pushed up companies’ aftertax profits. ...
  • But a pickup in their spending didn’t last. ...
  • Employment and wages rose. ...
  • Housing prices rose more slowly in some areas. ...
  • U.S. companies brought cash back from overseas. ...
  • Much of what they retrieved went to buybacks. ...
  • The cuts came at a cost. ...

https://taxprof.typepad.com/taxprof_blog/2020/01/wsj-did-the-us-tax-overhaul-do-what-it-promised.html

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