Good evening. How’s your Tuesday so far? Has it been super? While we wait for today’s election results, here’s a fiscal update.
Trump-Era Corporate Tax Cuts Boosted Investment, but Did Not Pay for Themselves: Analysis
The corporate tax cuts included in the 2017 Tax Cuts and Jobs Act helped boost business investment while delivering a small increase in worker pay, according to a new analysis published by the Bureau of Economic Research. The tax cuts did not, however, come anywhere close to paying for themselves, as their Republican proponents in Congress and the Trump administration insisted they would, and instead are costing the federal government more than $100 billion per year in lost revenues.
The team of four researchers affiliated with Princeton University, the University of Chicago, Harvard University and the Treasury Department concluded that provisions providing enhanced tax breaks for corporate investment were the most effective part of the legislation, providing clear positive effects, though not without significant costs.
“The evidence that taxes matter for investment really is there,” author Gabriel Chodorow-Reich of Harvard told The New York Times’s Jim Tankersley. “And the evidence that corporate tax cuts are expensive also is there. They’re both just features of the data.”
Additional business investment spurred by the tax legislation, which also slashed the top corporate tax rate from 35% to 21%, made the U.S. economy about 0.1% larger each year, according to the analysis. That increase translates to a pay bump of about $750 per year for the average worker — far short of the $4,000 to $9,000 increase cited by Republican lawmakers and conservative policy experts who lobbied for the package of tax cuts.
Low, low tax rates: A separate analysis by the liberal-leaning Institute on Taxation and Economic Policy found that tax rates for some of the nation’s largest corporations have fallen well below the 21% top rate put in place by the 2017 tax law. Looking at the 342 companies in the Fortune 500 that have reported profits every year between 2018 and 2022, ITEP calculated that their average income tax rate was just 14.1%.
“This is mainly due to loopholes and special breaks that the 2017 tax law left in place and, in some cases, introduced,” a team of ITEP analysts wrote. “Tax avoidance occurs because Congress chooses to allow it, either by enacting special exceptions and breaks from the regular tax rules, or by leaving in place loopholes that are clearly being exploited.”
The bottom line: The latest analysis of the 2017 Trump tax cuts provides further evidence that changes in tax laws can help shape corporate investment decisions — and that tax cuts do not pay for themselves.
Quote of the Day: A Sinematic Ending
"I believe in my approach. But it's not what America wants right now. … Because I choose civility, understanding, listening, working together to get stuff done, I will leave the Senate at the end of this year."
− Arizona Sen. Kyrsten Sinema, announcing in a video message posted online Tuesday that she won’t run for reelection. Sinema, in her first term in the Senate, had left the Democratic Party to become an independent. She was at the center of a number of bipartisan groups the produced some legislative policy victories — but she also recently saw the border security deal she had spent months negotiating collapse almost immediately because of Republican opposition, and she likely faced an uphill battle to win another term. Politico’s Burgess Everett notes that her decision “continues an exodus of consensus-building centrists that, for a couple short years, essentially ran the upper chamber.”
Rising Costs of U.S. Nuclear Modernization Program Spur Questions: Report
The rising costs of the Air Force’s nuclear modernization effort, called Sentinel, have prompted a review of the program and questions about the need for intercontinental ballistic missiles, according to a new report at The Hill.
“Sentinel has reopened a debate in Congress and in the nuclear security world about the role and necessity of ICBMs, viewed as the most destabilizing part of the U.S. [nuclear] triad because they are easy targets, invite a devastating attack in the U.S. heartland and give the president only 30 minutes to respond in the event of an attack,” The Hill’s Brad Dress writes, adding that “some members of Congress are increasingly frustrated over rising cost estimates and anxious to pump the brakes on the program.”
Dress reports that the Sentinel program aims to replace or refurbish some 400 Minuteman missiles and related infrastructure by 2030, but some critics fear that the cost of the program could threaten funding for conventional forces.
Fiscal News Roundup
- Earmark Battle Emerges as Late Threat to Spending Bill – The Hill
- House Conservatives Fume Over Deal Backed by Johnson – The Hill
- Barrasso to Pass on Senate GOP Leader Run – Politico
- Super Tuesday Is the First Test of What Next Year’s House GOP Will Look Like – Politico
- Brighter Economic Mood Isn’t Translating Into Support for Biden – New York Times
- Biden Administration Would Cap Credit Card Late Fees at $8, Part of Campaign Against Junk Fees – Associated Press
- Business Groups Hit Back at Biden Administration's Effort to Cap Credit Card Late Fees – NBC News
- Cyberattack Paralyzes the Largest U.S. Health Care Payment System – New York Times
- Trump’s Tax Cut Fueled Investment but Did Not Pay for Itself, Study Finds – New York Times
- Aging Bridge Is a Flashpoint in Competitive Washington State House Race – New York Times
- Apparently Healthy, but Diagnosed With Alzheimer’s? – New York Times
- China Defense Spending to Climb 7.2% as Xi Pursues Buildup – Bloomberg
- How Hospitals Are Fighting to Keep Their Former Doctors From Seeing Patients – NBC News
Views and Analysis
- 5 Things to Know About Congress’s Plan to Avert a Shutdown This Week – Aris Folley, The Hill
- This Is a Silly Way to Run a Government, but We Do It Every Year – Zachary B. Wolf, CNN
- Americans Are Happier About the Economy. Why Are They Crediting Trump? – Catherine Rampell, Washington Post
- What Biden Did on Health Care: From Drug Prices to Abortion Rights – Politico Staff
- Congress Poised to Kneecap Antitrust Division – David Dayen, American Prospect
- Why There's So Much Confusion Over Housing Inflation – Courtenay Brown and Neil Irwin, Axios