Will the Tax Cuts and Jobs Act do what the President says it’s done? President Trump highlighted national economic gains last night in his State of the Union address, and touted the TCJA as a catalyst for even more gains for American taxpayers. The jury is still out, of course: A new CNBC Fed Survey of 40 economists, fund managers and strategists finds that most don’t see much TCJA benefit going to workers. Most of the TCJA windfall, they predict, will be devoted to buybacks, dividends, and paying down debt. Respondents estimated that workers will see 12 cents of every dollar of tax cut gains.
Paying for infrastructure. Despite President Trump’s promises, lawmakers are struggling to figure out how to pay for those new roads and bridges and the like. Senate Finance Committee Chair Orrin Hatch says he won’t rule out a gas tax hike, though he didn’t sound quite like a convert. “Everything has to be on the table,” he told reporters yesterday.
A list you don’t want to be on. The US is the world’s second largest venue for financial secrecy, according to a new report from Tax Justice Network, a group that tracks these trends. The US has moved up to #2 behind Switzerland and just ahead of the Cayman Islands. Financial secrecy is a valuable tool for tax evasion and money laundering.
Pfizer reports a $10.7 billion gain from the TCJA. Pfizer reports higher income thanks to the new tax law, but will pay $15 billion in taxes over eight years on funds held overseas under TCJA’s transition tax. The pharmaceutical giant also says it plans to invest $5 billion in the US over the next five years.
Who deserves a break today? McDonald’s had to take a one-time 84-cent per share charge due to the TCJA. But on an adjusted basis, McDonald’s reported earnings of $1.71 per share. Chief Financial Officer Kevin Ozan says McDonald’s will invest $2.4 billion in 2018—but that money will largely go toward remodeling existing locations.
About those state responses to the SALT deduction cap. Several blue states are looking for ways to compensate taxpayers for the TCJA’s cap on state and local tax deductions. But TPC’s Len Burman and Frank Sammartino raise questions about their solutions: “They may be legally defensible, but they raise important questions about the interaction between federal and state taxes that policymakers at all levels need to address.”
Missouri Republican Governor Eric Greitens proposes a tax cut. He’d cut individual and corporate taxes by $800 million. His plan would cut the state’s top individual income tax rate from 5.9 percent to 5.3 percent. That top rate applies to income of more than $9,072 annually. Greitens also proposes to cut the state’s corporate tax rate from 6.25 percent to 4.25 percent and create a new non-refundable tax credit for low-income workers. A bit of context: He’s also asked for approval to take out a $250 million line of credit to pay tax refunds.
And in Oregon, lawmakers prepare for a budget shortfall. The state projects a $200 million to $300 million budget deficit this year due to the TCJA. Will lawmakers be able to address the shortage in a 35-day legislative session? Senate Republican leader Jackie Winters doesn’t believe the short session should accommodate major policy issues.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at [email protected]. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
