The Trump-GOP tax cut law, formally known as the Tax Cuts and Jobs Act (TCJA), passed Congress Dec. 20, 2017, and was signed into law by President Trump two days later. As we approach the law’s first anniversary, Americans for Tax Fairness recaps the major elements of the plan and analyzes its effects so far on our government, economy and society.
Key Features and Effects of the TCJA
- The law’s main focus was on cutting corporate taxes. It reduced the corporate tax rate on domestic profits by 40%—from 35% to 21%. It also cut individual taxes, mostly helping the well-off.
- The law was sold as a boon to the middle-class, but it primarily benefits the wealthy. That’s because it’s the rich who own most corporate stock and therefore benefit most from the corporate tax cuts. The richest 1% are expected to get over a fifth (21%) of the tax cuts this year. By 2027 when the law is fully implemented, 83% of the tax cuts will go to the top 1%. [Tax Policy Center]
- The law mostly fails in its promise to end profit shifting by corporations to offshore tax havens. Multinational corporations shift about $300 billion out of the United States each year, according to the Congressional Budget Office (CBO). The new tax law will only reduce that by $65 billion [p. 127]. In other words, 80% of the existing profit shifting will continue under the new law. And it gave U.S. corporations with accumulated offshore earnings a tax cut of over $400 billion on those profits. [Institute on Taxation and Economic Policy]
- Worse, the new law actually encourages offshoring of American jobs. It effectively taxes foreign profits of American firms at half the rate on domestic earnings, giving corporations added incentive to outsource jobs and production. Under another provision of the law, the more factories corporations build in foreign countries, the less U.S. tax they pay on their foreign profits. [NYT]
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