Ryan’s Twitter-TCJA Fail: House Speaker Paul Ryan attempted to tout the benefits of the Tax Cuts and Jobs Act over the weekend, noting that a high school secretary in Lancaster, Pennsylvania “was pleasantly surprised her pay went up $1.50 a week ... she said [that] will more than cover her Costco membership for the year.” After much social media mockery, he deleted the tweet within hours. TPC estimates the new law will cut taxes for middle-income households by an average of $930 this year, while the top 1 percent of earners will receive an average cut of $51,000. Maybe one woman’s pleasant surprise is another’s jackpot?
Post-TCJA bonuses: Big wins for whom? The New York Times’ Patricia Cohen looks at those bonuses companies have been doling out since enactment of the TCJA. “Some of the largess is not nearly as large as company news releases suggest,” she writes. Moreover, if corporations announced their bonus plan in 2017, they could deduct the cost at last year’s 35 percent corporate rate, even if they actually distribute the money in the early months of 2018 when the 21 percent rate is in effect. “That’s a very advantageous tax rule,” said TPC’s Steve Rosenthal.
Exxon gets a TCJA windfall but doesn’t commit to US investment. PolitcoPro reports that the oil giant’s plan to spend $50 billion in domestic oil and gas projects is just a projection. “We haven't made a decision to move forward at this point. But certainly [tax reform] will improve that investment confidence,” said Exxon’s Jeffrey Woodbury. Exxon reports that the TCJA resulted in a non-cash earnings gain of $5.9 billion in 2017.
Struggling companies don’t get any TCJA love. The Wall Street Journal reports (paywall) on how the TCJA eliminates retroactive tax refunds for firms that apply current losses to past tax bills, Troubled companies relied on net operating loss carrybacks to “ride through short downturns without laying off employees or otherwise harming their operations,” explained one bankruptcy attorney. Said another, “It doesn’t fix the business, but it fixed the balance sheet."
Just in time for Valentine’s Day: A TCJA quickie divorce incentive? Politico’s Brian Faler explains that divorce attorneys are urging their clients to take the leap sooner rather than later. The TCJA ends a 76-year-old deduction for alimony payments but only for divorce decrees after this year. For the wealthiest of unhappy couples, the deduction reduces the effective cost of an alimony payment by nearly 40 percent.
The TCJA’s international reforms: An Explainer. TPC’s Eric Toder describes the significant reforms here. Overall, “combined with the reduced corporate rate, they largely eliminate the incentive for US firms to accrue assets overseas, while seeking to protect the tax base from avoidance by both US and foreign-based multinationals.” But, the new law retains both the incentive for US companies to invest or report profits in low-tax countries, and creates a great deal of new complexity.
Did you bet on the Super Bowl? Should states tax your winnings? If you did wager, you would have been among those expected to put down $4.6 billion on last night’s game. The American Gaming Association says “The ban on sports betting has been a tremendous failure.” Bloomberg BNA reports on the group’s renewed call for the US Supreme Court to overturn the 26-year-old ban on sports betting. The law prohibits states from “authorizing” gambling related to professional and amateur sports leagues—and from collecting tax revenue from the enterprise.
Shahira Knight gets a White House promotion. Axios reports she’ll be named deputy director for domestic policy of the National Economic Council. Knight, a former top House Ways & Means Committee staffer, was widely seen as one of the few true tax experts among Trump’s policy staff. It is not clear how long her boss, Gary Cohn, will remain NEC chair.
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.
