“After more than three decades, Congress under President Trump, finally passed much-needed and long-overdue tax relief for millions of individuals, families and businesses. While the new tax bill is still not perfect, but it will go a long way in helping individuals, families, small to medium businesses as well as big corporations practically in every sector to be more competitive domestically as well as internationally. Consumers will receive much-needed tax relief and therefore, increase discretionary income. This Tax Bill will create still not too perfect but some what a fairer tax code that will trigger reinvestment in practically every state of America to create more jobs and better wages. This will boost the spending power of consumers and take America on the path of more prosperity”, says the author.
Personally, I have failed to understand the logics of Democrats that the Trump Tax Bill is anti-growth and anti-common person. The fact is this bill is pro-growth and pro-people. There is no doubt that the residents like me of high property and state tax states like New Jersey, New York, California etc. will be affected to a certain extent because of the $10,000 cap on property tax and state tax deduction but not a whole lot because of the doubling up of standard deduction.
As an resident of New Jersey since 1996, I can simply say if the property taxes are exorbitantly high; it is the residents that are to be blamed for allowing unionized politicians posing as Republicans & Democrats to govern 8.5 mil people in 8,000 sq. miles with 588 governments with over 10,000 elected/appointed politicians and 660,000 employees with no or little work. Unless the residents revolt to cut down the number of governments, elected/appointed politicians as well as the employees; they will see every year their property and state taxes going up to financially feed the monstrous size 588 governments of New Jersey.
Democrats are ignoring the fact that about 70 percent of Americans take the standard deduction. Trump Tax Bill has doubled that deduction to $12,000 for individuals, 18,000 for heads of household, and $24,000 for joint filers combined with some more generous 7 tax brackets and rates. It would mean less tax taken from most individuals’ and families’ paychecks. Child tax credit has been increased from $1,000 to $2,000 per child. A portion $1,400 would be refundable. That is, taxpayers could get up to $1,400 back from the government, even if they owed no tax. The Bill also raises the income limit for child credit, so families with higher incomes can qualify. Families also could claim a new, $500 “family” tax credit for non-child dependents. That credit is non-refundable. The Bill would increase the amount that could be contributed to tax-favored ABLE savings accounts, designed to save for the needs of disabled adults and children. Contributions could also make the beneficiary of an ABLE account eligible for the saver’s credit, intended to supplement savings for lower-income people. This Bill also provides a temporary break to low-earning people, applying the lowest, 10% rate to more of their taxable income (individuals would get an additional $200 in income taxed at 10 percent; joint filers would get an additional $400 taxed at that rate). For Tax payers subject to the alternative minimum tax, for individuals the exemption from current first $54.300 has been raised to $70,300. For married couples filing jointly the limit from $54,500 has been raised to first $109,400 of income. Under the new Tax Bill by one estimate, a family of four with an income of roughly $73,000 would save $1,500 each year in taxes. In nut shell under this Tax Bill, it would mean less tax taken from most individual’s and families’ paychecks.
Lower Property & state taxes deduction: A maximum $10,000 deduction for state and local taxes could be split between property taxes, and either state income or sales taxes. That’s compared with an unlimited deduction in the current tax code is certainly a setback for residents of high property & local tax states. This $10,000 cap applies to both singles and married couples filing jointly, though married people filing separately could deduct a maximum of only $5,000 each. People who run home businesses could still deduct the portion of state and local taxes, including property tax, that applies to that business. Interest on up to $750,000 in mortgage debt on a newly purchased primary home could be deducted; that’s a drop from the $1 million allowed now. The interest on home-equity loans and line of credit would no longer be deductible, regardless of what it’s used for.
Upper-Middle Class Tax payers/investors with passive income. Will get a significant tax break on a portion of qualifying income. According to a research paper authored by 13 tax experts notes, certain wealthy individuals might be able to incorporate themselves and pay tax on interest income at the corporate rate of 21 percent, not the top 37 percent they’d pay as individuals.
Coming to the rich, the heirs of wealthy people’s surviving spouses would continue to pay no estate tax. The estate tax exemption would double; currently non-spousal heirs would avoid a 40 percent tax on the first $5.49 million inherited from one individual and $10.98 million inherited from two.
The main villain for the Tax Bill critics “The Corporations”: Their tax rate would drop to 21 percent from a top 35 percent rate; decline of a whopping 40 percent! Also allows fully allowable deductions for capital expenses and lower levies on repatriating overseas profits.
Real Estate Businesses: can claim a new tax break that’s planned for partnerships, limited liability companies and other so-called “pass-through” entities.
Technology: U.S. Tech companies are sitting on $3.1 trillion in overseas earnings, according to an estimate from Goldman Sachs. The largest stockpile belongs to Apple at $252 billion – 94% of its total cash. Microsoft, Cisco Systems, Google parent Alphabet Inc. and Oracle round out the top five, data compiled by Bloomberg show. One caveat is that the repatriation provision could generate a large tax bill. In Apple’s case, a 14.5 percent rate would equate to $36.6 billion in taxes, or about $7 a share, according to Bloomberg Intelligence.
Banks: The earnings of big U.S. banks will be boosted by an average of 13 percent, according to Goldman Sachs. Leading the way will be Wells Fargo (17%) and PNC Financial Services Group Inc. (15%).
Autos: The industry’s biggest companies, including General Motors and Ford, will benefit from the rate cut and the reduction on levies for repatriating overseas profits, according to UBS.
Consumer products/retail: Retailers are big winners from the rate cut because many generate all, or at least an overwhelming majority, of their income in the U.S. and pay the highest tax rates of any industry. Most tax breaks and loopholes are not applicable to retail. Total sales from the nearly 3.8 million retail establishments in the United States reached about $2.6 trillion in 2016. Retailers employ almost 29 million, and support more than 42 million jobs in the U.S. That increases the prospect for better wages for existing employees in this sector and more jobs.
Full and immediate deductions on capital expenditures could allow at least one retailer to not owe any federal taxes the next two years. Aaron’s Inc., which leases televisions and refrigerators to consumers at more than 1,700 stores, will be able to use deductions on buying inventory, which are considered capital investments, to wipe out its tax bill in 2018 and 2019, according to Stifel Nicolaus & Co.
Chains and consumer brands also expect the tax bill to boost demand for their goods and services. Many of those companies rely on middle- and low-income shoppers for the bulk of their sales, and changes to individual taxes — such as doubling the standard deduction — will increase discretionary income.
Industrials: In machinery, trucking is likely to see the biggest impact, according to Jefferies. The corporate rate cut would give U.S. transportation companies of all sizes more money to upgrade their fleets with fuel-efficient vehicles. The bill’s increased deductions for capital spending would add another incentive to buy new 18-wheelers, a potential boon for truck makers like Paccar Inc. and Navistar International Corp.
Energy: oil-and-gas companies will be big winners because they pay the second-highest effective tax rate of any sector, at 37 percent, according to Bloomberg Intelligence. But a number of oil explorers and equipment providers won’t benefit because their operations are unprofitable.
Hospitals and insurers: The bill is estimated to boost insurance companies’ profits by as much as 15 percent because they pay high rates, according Ana Gupte, an analyst at Leerink Partners.
Pharmaceuticals: U.S. drug makers will be one of the biggest beneficiaries of the repatriation portion of the bill. They’ve been sitting on billions of dollars in overseas earnings and can now bring home that cash at a reduced rate. Biotech and pharma companies will get a smaller tax credit for developing drugs for rare diseases. Under current law, they can deduct 50 percent of the cost of testing drugs for rare or orphan diseases that affect only small numbers of patients. The revised bill cuts that amount to 25 percent, raising government revenue by $32.5 billion over a decade.
Chris Martin in his article “Hidden Benefit to U.S. Corporate Tax Cuts: Lower Utility Bills” in Bloomberg wrote that there’s one place where every American may benefit from lower corporate income-tax rates: utility bills. Regulated utilities may pass tax savings on to ratepayers, consumers may get share of estimated 15% cut to utility tax. An average consumer could see a reduction of about 5 percent off their monthly bill, according to Rhame.
After more than three decades, Congress under President Trump, finally passed much-needed and long-overdue tax relief for millions of individuals, families and businesses. While the new tax bill is still not perfect but it will go a long way in helping individuals, families, small to medium businesses as well as big corporations practically in every sector to be more competitive domestically as well as internationally. Consumers will receive much-needed tax relief and therefore, increase discretionary income. This Tax Bill will create still not too perfect but some what a fairer tax code that will trigger reinvestment in practically every state of America to create more jobs and better wages. This will boosts the spending power of consumers and take America on the path of more prosperity.
If we want sustained and continuous economic growth and prosperity for all with low levels of poverty, the corporations must come up with a solution for equitable distribution of nation’s economic prosperity by voluntarily defining what should be the maximum or reasonable pay, perks and retirement packages for its executives. Corporations must stop creating high levels of economic inequalities by fraudulently defining the minimum wages for its workers that have if not equal; at least equitable contributions in creating the wealth for corporations and the nation. An Economy of exclusions, gross economic injustice with very high inequalities cannot continue forever because it can bring down the country with a massive class war between the “Haves” and the “Have Nots”.
(Data Compiled from various sources)
(The author is a social activist and is a regular contributor to The Indian Panorama. He can be reached at [email protected])