There is a Free Lunch, Even If You Have a Lot of Lunch Money
Democrats say these businesses don’t pay enough in taxes, but they won’t pay anything if they aren’t here! – From a tweet by Congressman Mike Kelly on Feb. 11, 2020.
In reality, under Congressman Mike Kelly’s beloved Tax Cuts and Jobs Act, almost 100 businesses don’t pay anything even if they are here.
Ninety-one corporations in the Fortune 500 paid no federal taxes in 2018 despite earnings totaling about $101 billion, according to a report by the Institute of Taxation and Economic Policy, a left-leaning think tank.
The tax plan was supposed to produce higher wages. However, inflation-adjusted wages are rising at the same pace as the two years before President Donald Trump took office, according to a December 2019 report by the Washington Post. Most households got at least a very small tax cut, but the savings were so little that most Americans didn’t even notice, according to multiple surveys.
Overall, more than 60 percent of the tax savings went to the top 20 percent of the income ladder, according to the nonpartisan Tax Policy Center.
The tax law cut the corporate tax rate from 35 to 21 percent, however a lot of companies weren’t paying 35 percent because of deductibles, tax breaks and other loopholes. Not surprisingly, a lot of them aren’t paying 21 percent now.
About 400 of America’s largest corporations paid an average federal tax rate of about 11 percent on their profits -- the lowest effective corporate tax rate the ITEP has found since it started evaluating this data in 1984. Under the previous tax code, the corporations’ effective rate was about 21 percent from 2008 to 2015.
Apparently, Kelly and the GOP weren’t interested in a doing anything about this windfall for rich corporations.
“When drafting the tax law, lawmakers could have eliminated special breaks and loopholes in the corporate tax to offset the cost of reducing the statutory rate,” the ITEP report says. “Instead, the new law introduced many new breaks and loopholes, though it eliminated some old ones.”
As far as the tax cuts giving Kelly’s “job creators” the opportunity to invest and grow the economy – the old trickle-down fantasy -- much of the extra cash was spent on record stock buybacks, which increase share prices without requiring new investment or hiring.
Post columnist Catherine Rampell wrote in December 2019 that, while supporters of the tax bill promised it would pay for itself by juicing the economy, actually the economy is on track to grow slightly more than 2 percent this year, which is near the long-run trend predicted before the tax cuts. It was about 3 percent during the postwar period and 4.5 percent when Bill Clinton was impeached.
NPR’s Scott Horsley wrote in December 2019 that the tax cut, along with increased government spending, gave a short-term lift to the economy and businesses temporarily boosted investment, but business investment declined the second and third quarters of 2019.