Banks make bank with the TCJA. Big US banks trimmed $21 billion from their tax bills thanks to the Tax Cuts and Jobs Act, meeting or exceeding their initial predictions. On average, effective tax rates for banks fell to less than 19 percent. In 2016, banks’ average effective tax rate was 28 percent. Also in 2018: Banks cut jobs and slowed lending.
But multinationals are just fiddling around the edges. Bloomberg reports that while the TCJA largely ended the practice of corporate repatriations as a tool to reduce taxes, firms continue to shift their intellectual property to lower tax jurisdictions. Even though the TCJA deeply cut the US corporate tax rate, it remains in the middle-of-the-pack among industrialized nations, giving companies plenty of other opportunities to seek lower rates. The result, says one corporate tax lawyer, is little more than a “tweak around the edges” when it comes to tax planning.
Whither infrastructure? The White House had signaled that President Trump would highlight his infrastructure initiative in Tuesday’s state of the union address. But other than a brief call for a bipartisan deal, he offered no new ideas. While Democrats say they are willing to talk, there has been little progress on the toughest issue: How to pay for an infrastructure initiative.
“America, we have a problem.” The ill-fated Apollo 13 space mission strikes the Tax Hound as a metaphor for a problem facing the country today: The IRS staffing crisis. But the column notes a couple of key differences, and they have nothing to do with the absence of a film adaptation starring Tom Hanks. Government shutdowns have consequences—short-term and long-term—for taxpayers.
No good deal goes unpunished? Bloomberg takes a deep dive into Wisconsin’s deal with Foxconn. The state offered a huge tax break to the Taiwanese chip maker in exchange for manufacturing jobs… but interviews with 49 people familiar with the project point to trouble on the horizon.
No plans, as yet, for a final trade deal with China. Treasury Secretary Steven Mnuchin says President Trump and China’s President Xi Jinping have not scheduled a meeting to finalize a trade deal. The US is set to increase tariffs on Chinese imports on March 2 unless the two nations reach an agreement. Mnuchin and US Trade Representative Robert Lighthizer are traveling to Beijing for more talks next week.
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