Tax reform

[BradInATX 9208]

21 minutes ago, Hugo Stiglitz said:

I’ve consulted with a local accountant about going the S Corp route.  Probably going to do it next month.

Definitely should look into it. My first year I didn't know what I was doing and paid about 15k more in taxes than I would have as an S-Corp. You're throwing money away, most likely.

[Fudge Nuggets 19407]

2 hours ago, zork said:

guessing: somewhat big house, substantial loan, rising property taxes, kids grown?  or is it a humblebrag about an income rise offsetting the tax cut?

None of the above.  Sometimes obvious answer is correct answer.  Dotard fucked us.

Edited April 18, 2019 by Fudge Nuggets

[zork 629]

49 minutes ago, Fudge Nuggets said:

None of the above.  Sometimes obvious answer is correct answer.  Dotard fucked us.

in my case:

• made more,
• paid less,
• was simpler due to bigger standard deduction (so 10k limits were offset)and
• fully utilized both kids as big help in tax reduction.

Dotard didn't fuck my household is my conclusion.

[Okie State 3887]

It's almost as if it impacted different people in different ways depending on their different financial situations.

[Foosters 18224]

7 minutes ago, Okie State said:

It's almost as if it impacted different people in different ways depending on their different financial situations.

Except for the ultra-wealthy and corporations, right?

[Fudge Nuggets 19407]

1 hour ago, zork said:

in my case:

• made more,
• paid less,
• was simpler due to bigger standard deduction (so 10k limits were offset)and
• fully utilized both kids as big help in tax reduction.

Dotard didn't fuck my household is my conclusion.

Good for you.  You should try to pay your fair share next year.

[FORTY NINE TO ZERO 2649]

Per the online thing I paid 10k less. Which is nice 

[yoladu 4187]

On 4/12/2019 at 10:20 AM, Incredulity said:

So, I am supposed to believe Irvine CA Single Mom earning 16.50 is not on any welfare/WIC/rent subsidy?

i dunno. Why should i have to subsidize a full time employee of Chase Bank in order to put food on her table so that Jamie Dimon can make more money for himself and his shareholders?

Edited April 18, 2019 by yoladu

[Incredulity 11861]

25 minutes ago, yoladu said:

i dunno. Why should i have to subsidize a full time employee of Chase Bank in order to put food on her table so that Jamie Dimon can make more money for himself and his shareholders?

I don’t have any great love for big banks or Dimon.  I don’t agree that it is Dimon’s “fault” or responsibility to start paying every position a “living wage”.  There are and always have been positions that are not careers with compensation levels to support a family.  

Frankly we have a pretty big problem, as forcasted, where low earners described in the above video reach the income level just above transfer payments.  Its going to multiply as the 15 wages start to get implemented across the country.

  I can also tell you what would most likely happen in that fictional scenario is the teller would request fewer hours to get under the threshold.

Edited April 18, 2019 by Incredulity

[Okie State 3887]

Except for the ultra-wealthy and corporations, right?

I've never defended the handout that was given to corporations or the ultra wealthy. We ALL got screwed long-term, but that's not what was being referenced.

[Brew 3049]

On 4/18/2019 at 9:28 AM, BradInATX said:

Are you self employed? I got some new fangled QBD thing that more than offset that. S corp tho

 

Self employed get the new fangled QBD thing also and would also get business expenses and a home office. 

[Brew 3049]

On 4/18/2019 at 9:59 AM, Incredulity said:

You are stupid enough to be a sole proprietor?  

makes sense.

He’s not a sole proprietor if he lost the unreimbursed business expense deduction, it only affected W-2 employees. You’re clearly stupid enough to give tax advice when you may want to leave that to others.  Plenty of cases where being a SP makes the most sense and also several states where it is the most economic of the options if liability isn’t a concern.

[Incredulity 11861]

3 hours ago, Brew said:

He’s not a sole proprietor if he lost the unreimbursed business expense deduction, it only affected W-2 employees. You’re clearly stupid enough to give tax advice when you may want to leave that to others.  Plenty of cases where being a SP makes the most sense and also several states where it is the most economic of the options if liability isn’t a concern.

It wasn’t a tax based comment.

I would love to hear of a business transaction in the modern world where, “liability isn’t a concern”.

[Brew 3049]

17 hours ago, Incredulity said:

It wasn’t a tax based comment.

I would love to hear of a business transaction in the modern world where, “liability isn’t a concern”.

There are plenty of 1099 contractors where uninsurable liability isn’t a concern. There are a number of entities that operate as GP’s which is no different because uninsurable liability isn’t a concern.

[Bruh Man 3160]

 

[gmr548 16681]

 

Nah bruh, 1 percent are really hurting.

Sent from my SM-G920V using Tapatalk

[Gladeite 376]

Limited Partnership guy here.  A substantial reduction in overall tax burden for 2018.  But I thought the 39.6+% marginal rate was too high in 2017 and damn near intolerable.  

 

[Mojo Hand 4580]

On 4/28/2019 at 12:04 AM, Bruh Man said:

 

Well, you can't say that Trump didn't show us all what he thought of Gold Star families during the 2016 campaign.  This, like all of it, is directly on everyone who didn't vote for his opponent. 

[Al Bundy's Napoleon Hand 13618]

No one has any excuse to vote for this piece of shit again.

[pepper brooks 580]

this tax cut did nothing for anyone.  It makes you think you're paying less due to lower rates, but limiting more deductions ends up being at best a wash, or moderately worse for me.  I pay a slightly lesser rate on higher taxable income due to phase outs and limitations on deductions.  It's nothing more than a mirage that there was a tax cut.  

[tucker 238]

 

[happyfunball 481]

 

Here is a better chart but similar sentiment.

[Bozo_Casanova 26773]

this tax cut did nothing for anyone.  It makes you think you're paying less due to lower rates, but limiting more deductions ends up being at best a wash, or moderately worse for me.  I pay a slightly lesser rate on higher taxable income due to phase outs and limitations on deductions.  It's nothing more than a mirage that there was a tax cut.  

Welcometothepartypal.jpg

[Francisco 2.0 32543]

But of course they did. 'Cause tax cuts always spur investment, hiring, etc.  The moose out front told me so.

 

https://arstechnica.com/tech-policy/2019/05/att-promised-7000-new-jobs-to-get-tax-break-it-cut-23000-jobs-instead/

 

Quote

AT&T has cut more than 23,000 jobs since receiving a big tax cut at the end of 2017, despite lobbying heavily for the tax cut by claiming that it would create thousands of jobs.

AT&T in November 2017 pushed for the corporate tax cut by promising to invest an additional $1 billion in 2018, with CEO Randall Stephenson saying that "every billion dollars AT&T invests is 7,000 hard-hat jobs. These are not entry-level jobs. These are 7,000 jobs of people putting fiber in ground, hard-hat jobs that make $70,000 to $80,000 per year."

 

Quote

The corporate tax cut was subsequently passed by Congress and signed into law by President Trump on December 22, 2017. The tax cut reportedly gave AT&T an extra $3 billion in cash in 2018.

But AT&T cut capital spending and kept laying people off after the tax cut. A union analysis of AT&T's publicly available financial statements "shows the telecom company eliminated 23,328 jobs since the Tax Cut and Jobs Act passed in late 2017, including nearly 6,000 in the first quarter of 2019," the Communications Workers of America (CWA) said yesterday.

 

Quote

AT&T's total employment was 254,000 as of December 31, 2017 and rose to 262,290 by March 31, 2019. But AT&T's overall workforce increased only because of its acquisition of Time Warner Inc. and two smaller companies, which together added 31,618 employees during 2018, according to an AT&T proxy statement cited in the CWA report.

Excluding employees gained via mergers, AT&T's workforce dropped from 254,000 to 230,672, a cut of 23,328 jobs, the CWA report points out. These numbers are for AT&T's global workforce, but the vast majority of its employees are in the US. AT&T reported having 44,892 non-US employees as of October 1, 2018.

The most recent layoffs affected 368 union technicians in California, the CWA said last week.

AT&T also cut more than 10,000 jobs each year in 2016 and 2017. AT&T had 281,450 employees as of December 31, 2015, 268,540 as of December 31, 2016, and 254,000 by the end of 2017.

 

Quote

"AT&T's annual report also shows the company boosted executive pay and suggests that after refunds, it paid no cash income taxes in 2018 and slashed capital investments by $1.4 billion," the CWA wrote.

AT&T reported $21.6 billion in capital expenses in 2017 and $21.3 billion in 2018, a cut of $300 million. CWA told Ars that the cut is $1.4 billion when "excluding federal government reimbursements for the construction of FirstNet," AT&T's government-funded public safety network.

AT&T capital spending is already down more than $900 million this year, as the telco reported Q1 2019 capital expenditures of $5.18 billion, down from $6.12 billion in Q2 2018.

 

 

[elfenix 34658]

CRS says tax cuts were pretty much useless.

Quote

In 2018, gross domestic product (GDP) grew at 2.9%, about the Congressional Budget Office’s (CBO’s) projected rate published in 2017 before the tax cut. On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy. Although growth rates cannot indicate the tax cut’s effects on GDP, they tend to rule out very large effects particularly in the short run. Although investment grew significantly, the growth patterns for different types of assets do not appear to be consistent with the direction and size of the supply-side incentive effects one would expect from the tax changes. This potential outcome may raise questions about how much longer-run growth will result from the tax revision.

https://www.everycrsreport.com/reports/R45736.html

[Bookman 4754]

On 4/25/2019 at 1:16 AM, Incredulity said:

It wasn’t a tax based comment.

I would love to hear of a business transaction in the modern world where, “liability isn’t a concern”.

For many, liability isn’t a concern if they have a good insurance policy.

[tucker 238]

The U.S. budget deficit grew 77% in the first 4 months of the 2019 fiscal year (beginning Oct. 1) from the year prior, driven by sweeping tax cuts passed at the end of 2017 and increased federal spending.

https://www.axios.com/federal-budget-deficit-trump-obama-f11a2d59-56cb-4932-a60b-6ed152a670a8.html

[Okie State 3887]

In general, decreasing revenue and increasing costs has a negative impact on budgets. Someone should tell them.

[Js1 86934]

No wai 

 

[Foosters 18224]

9 minutes ago, Js1 said:

No wai 

 

Less than expected? There are people surprised by this?

[Francisco 2.0 32543]

One Trump Tax Cut Was Meant to Help the Poor. A Billionaire Ended Up Winning Big.

 

Quote

Under a six-lane span of freeway leading into downtown Baltimore sit what may be the most valuable parking spaces in America.

Lying near a development project controlled by Under Armour’s billionaire CEO Kevin Plank, one of Maryland’s richest men, and Goldman Sachs, the little sliver of land will allow Plank and the other investors to claim what could amount to millions in tax breaks for the project, known as Port Covington.

They have President Donald Trump’s 2017 tax overhaul law to thank. The new law has a provision meant to spur investment into underdeveloped areas, called “opportunity zones.” The idea is to grant lucrative tax breaks to encourage new investment in poor areas around the country, carefully selected by each state’s governor.

 

Quote

But Port Covington, an ambitious development geared to millennials to feature offices, a hotel, apartments, and shopping, is not in a census tract that is poor. It’s not a new investment. And the census tract only became eligible to be an opportunity zone thanks to a mapping error.

As the selection process was underway, a deputy chief of staff to Maryland’s governor wrote in an email that “Port Covington does not qualify” as an opportunity zone.

Maryland’s governor chose the area for the program anyway — after his aides met with the lobbyists for Plank, who owns about 40% of the zone.

 

Quote

“This is a classic example of a windfall benefit,” said Robert Stoker, a George Washington University professor who has studied economic development in Baltimore for decades. “A major investment was already planned and now is in a zone where they are going to qualify for all kinds of beneficial tax treatment.”

In selecting Port Covington, the governor had to exclude another Maryland community from the opportunity zone program. In Baltimore, for example, the governor dropped part of a neighborhood that city officials recommended for the program — Brooklyn — with a median family income one-fifth that of Port Covington. Brooklyn sits just across the Patapsco river from Port Covington, in an area that suffers from one of the highest drug and alcohol death rates in Baltimore, which in turn has one of the highest drug fatality rates nationwide.

Spoiler

In a statement, Marc Weller, a developer who is Plank’s partner in the project, defended the opportunity zone designation. “Port Covington being part of an Opportunity Zone will attract more investors, foster more economic growth in a neglected area of the City, and directly benefit all of the surrounding communities for decades to come,” Weller said. Supporters say the Port Covington development could help several nearby struggling south Baltimore neighborhoods.

An official in the administration of Maryland’s Republican governor, Larry Hogan, said, “The success of that project is really going to go a long way to providing benefits for the whole city of Baltimore.” The official added: “The governor is a huge supporter of the development.”

A spokesperson for the state’s Department of Housing and Community Development, which was involved in the selection process, said that “due to the time limits of the federal tax incentive, the state of Maryland did purposefully select census tracts where projects were beginning to increase the odds of attracting additional private sector investment to Maryland’s opportunity zones in the near term.”

The Birth of a New Tax Break

In December 2017, Trump signed the Tax Cuts and Jobs Act, his signature legislative achievement. Much criticized as a giveaway to the rich, the law includes one headline provision that backers promised would help the poor: opportunity zones. (Listen to the “Trump, Inc.” episode where we travel to an opportunity zone where the Kushner Companies owns large tracts of property.)

Supporters of the program argued it would unleash economic development in otherwise overlooked communities. “Our goal is to rebuild homes, schools, businesses and communities that need it the most,“ Trump declared at a recent event, adding, “To revitalize these areas, we’ve lowered the capital gains tax for long-term investment in opportunity zones all the way down to a very big, fat, beautiful number of zero.”

The provision has bipartisan support. “These cities are gold mines,” New Jersey Sen. Cory Booker, a 2020 presidential hopeful and main Democratic architect of the program, told real estate investors in October. “They’re domestic emerging markets that are more exciting than anything you’ll see overseas.”

Here’s how the program works. Say you’re a hedge fund manager, you purchased Google stock years ago, and are sitting on $1 billion in gains. If you sell, you’d send the IRS about $240 million, a lot less than ordinary income tax but still annoying. To avoid paying that much, you can sell the shares and put the $1 billion into an opportunity zone. That comes with three generous breaks. The first is that you defer that $240 million in capital gains tax, allowing you to invest more money up front. But if that’s not enough for you, you can hold the investment for several years and you’ll get a significant reduction in those taxes. What’s more, any additional gains from the new investment are tax-free after 10 years.

It’s impossible to predict how much the tax break will be worth to individual investors because it depends on several variables, not least whether the underlying project gains in value. But one investment pitch projected 10-yearreturns would jump to 91% from 29% on a hypothetical $1 million investment. That includes $284,000 in tax breaks — money the federal government would have collected from taxpayers with capital gains but for the program.

The tax code already favored real estate developers like Trump, and his overhaul made it even friendlier. Investors can put money into a range of projects in opportunity zones, but so far most of the publicly announced deals are in real estate. The tax break has led to a marketing boom, with Wall Street pitching investors to raise funds to invest in the zones. Critics argue that the program is flawed, pointing out that there’s no guarantee that the capital investment will help community residents, that the selection process was vulnerable to outside influence, and that it could be a giveaway for projects that were going to happen anyway. In a case in Chicago uncovered by the Real Deal, two tracts already slated for a major development project were selected by the governor as opportunity zones even though city officials hadn’t initially recommended them.

Under the new law, areas of the country deemed to be “low-income communities” would be eligible to be named opportunity zones. The Treasury Department determined which census tracts qualified. Then governors of each state could select one quarter of those tracts to get the tax benefit.

That governor prerogative turned out to be very useful to Kevin Plank.

Plank’s Dream

In 2012, Plank-connected entities quietly began buying up waterfront property on a largely vacant and isolated peninsula south of downtown Baltimore. Often using shell companies to shield the identity of the true buyer, they ultimately spent more than $100 million acquiring much of the peninsula. Plank’s privately held Sagamore Development now controls roughly 40% of the area that would later be named an opportunity zone.

In early 2015, more than two and a half years before Trump’s tax law passed, Plank revealed himself as the money behind the purchases. He planned a new development and headquarters for Under Armour, the sports apparel company he started after coming up with the idea as a University of Maryland football player. Today, Under Armour employs 15,000 people. Plank has a net worth of around $2 billion.

Though the Port Covington area was cut off from downtown by I-95, Plank said he likes the location because of the visibility. “When people drive through Baltimore [on I-95] I literally want them to drive through and go, ’There’s Baltimore on the right. There’s Under Armour on the left,’” he told The Baltimore Sun.

A year later, Plank’s firm took his vision to the general public, running TV and print ads touting the new project. One of the ads, reminiscent of the Democratic presidential primary spots airing at that time, was filled with a diverse cast sharing their dreams for a new city within a city.

“We will build it. Together,” the ad begins, before running through a glittering digital rendering of contemporary urban design features. Office towers, shops, transit, parks, jobs — all of it to be anchored by a new world headquarters of the city’s most visible brand name, Under Armour. Sagamore would spearhead the project and sell land to others who would build businesses and housing.

Even before qualifying for the opportunity zone break, taxpayers were going to subsidize the development. Days after the ads touting togetherness, Plank proposed that the city float $660 millionin bonds to help build what the company has said would be a $5.5 billion development. Opponents contended Plank’s proposal amounted to corporate welfare that would exacerbate the city’s stark economic and racial divides. But the company agreed to provide millions of dollars to the city and a group of nearby low-income neighborhoods to gain support for the project, and the City Council passed the measure that fall.

As Under Armour’s stock plummeted in 2017 amid slowing sales growth, progress on the Port Covington project lagged. That September, Goldman Sachs stepped in to commit $233 million from its Urban Investment Group. Hogan, himself a real estate developer, personally spoke with the then-CEO of Goldman, Lloyd Blankfein, about the deal.

Meeting With the Governor’s Office

In the weeks after the 2017 federal tax overhaul passed, Plank’s team spotted an opportunity.

Nick Manis, a veteran Annapolis lobbyist who has also represented the Baltimore Ravens, reached out to Hogan’s chief of staff about Port Covington, according to emails obtained by ProPublica through a public records request. The developers and their lobbyists had given at least $24,000 to Hogan’s campaigns in recent years.

But the developers had a problem.

The Friday before the meeting, a deputy chief of staff to the governor wrote in an email that “Port Covington does not qualify” for the coveted tax breaks.

The Port Covington tract, which includes a gentrified corner of South Baltimore north of the largely empty peninsula, was too wealthy to be an opportunity zone. There is a second provision of the law for wealthier tracts: A tract can qualify if it is adjacent to a low-income area. But Port Covington failed that test, too. Its median family income — nearly 160% of Maryland’s — exceeded the income cap even for that provision.

Port Covington was out — unless the tract could somehow be considered low-income in its own right.

On Feb. 5, the Port Covington development team arrived at the second floor of the statehouse in the opulent governor’s reception room to meet with top Hogan aides. The agenda for the meeting included opportunity zones, as well as transit and infrastructure issues. The developer’s team requested that the Port Covington tract be made an opportunity zone. The state officials “acknowledged their interest in receiving that designation,” a Hogan administration official said.

Bank Error in Your Favor

Three days after that meeting, Plank and the Port Covington developers got bad news. The Treasury Department released a list of census tracts across the country that were sufficiently poor to be included in the program. Port Covington was not included in that list.

Three weeks later, however, things turned around. The Treasury Department issued a revised list. The agency said it had left out some tracts in error. The revised list included 168 new areas across the country defined by the agency as “low-income communities.”

This time, Port Covington made the cut.

It couldn’t have qualified because its residents were poor. It couldn’t qualify because it was next to some place that was poor. But the tract could qualify under yet another provision of the law. Some tracts could make the cut if they had fewer than 2,000 people and if they were “within” what’s known as an empowerment zone. That was a Clinton-era redevelopment initiative also aimed at low-income areas.

Port Covington wasn’t actually within an empowerment zone, but it is next to one. So how did it qualify? The area met the definition of “within” because the digital map files the Treasury Department used showed that Port Covington overlapped with a neighboring tract that was designated an empowerment zone, Treasury officials told ProPublica.

That overlap: the sliver of parking lot beneath I-395. That piece of the lot is about one one-thousandth of a square mile.

There are no regulations or guidance on how to interpret the tax law’s use of “within,” said a spokesman for the Treasury Department’s Community Development Financial Institutions Fund, which compiled the maps. The agency made what it called a “technical decision” that any partial overlap with an Empowerment Zone would count as being “within” that zone — no matter how small the area, or if anyone lived there.

Or, if the overlap was even real.

Turns out, no part of Port Covington actually overlapped with the empowerment zone.

Treasury’s decision ignored a well-known problem in geographic analysis known as misalignment, mapping experts said.

Misalignment happens when the lines on digital maps made by two sources differ slightly about where things like roads and buildings lie, according to Henry Luan, a professor of geography at the University of Oregon.

For example, if a tract ends at a highway, one file might show the border on the near side of the highway while another — when zoomed all the way in — might show it a few feet away on the far side. When laid on top of each other, the two files end up with minuscule differences that don’t mean anything in the real world.

Except in this case, it had big real world consequences for Port Covington. The mapping error allowed the entire tract to qualify as an opportunity zone.

“That area of overlap is a complete artifact of” the map files Treasury used, said David Van Riper, director of spatial analysis at the Minnesota Population Center. “It’s not an actual overlap.”

Sometime in the mid-2000s, the Census Bureau used GPS devices to make its map files more accurately represent the country’s roads. One of the maps used by Treasury appeared to be based on the older, less accurate Census maps, Van Riper said.

Even accepting Treasury’s misaligned maps, the entire Port Covington tract receives tax benefits, even though less than 0.3% of it overlaps with the neighboring tract.

“Only a minimal overlap, but you make the whole Census tract benefit from the policy?” Luan said. “That doesn’t make sense to me.”

Port Covington is one of just a handful of tracts in the country that ProPublica identified that qualified through similar flaws in Treasury’s process.

Taking the Break

Nothing indicates the Port Covington developers had any influence on the Treasury’s decision.

But the lobbying of the governor before the Treasury change appears to have paid off.

As they were lobbying, Baltimore officials were working out which parts of the city would benefit most from being opportunity zones. They petitioned the governor to pick 41 low-income city neighborhoods to get the tax break, all of them well below the program’s maximum income requirements.

The city’s list remained largely intact when the governor made his selections in April. Hogan made just four changes, three of which qualified under the main criteria without the benefit of the mapping error. But the fourth didn’t: Port Covington.

Plank’s team cheered the revision. The very thing that made Port Covington a poor candidate to be an opportunity zone — that it wasn’t a low-income area — could make it exceptionally attractive to investors. In January, they convened an opportunity zone conference at their Port Covington incubator called City Garage featuring state officials and executives from Goldman, Deloitte and other firms.

“Port Covington kind of fits all the needs,” said Marc Weller, Plank’s partner, at the conference. “It has all the entitlements, and it has a financial partner in place as well. It’s probably the most premier piece of land in the United States that’s in an opportunity zone.”

The opportunity zone program has restrictions intended to prevent already-planned developments from benefitting. But the Port Covington developers told Bloomberg that the firm will be able to reap the benefits of the tax break because it has found new investors. Among the potential new investors who might take advantage of the tax break are Plank’s own family, one of the developers told the Baltimore Business Journal. A Port Covington spokesman denied that Plank’s family members are potential investors.

To get the maximum benefit, investments need to be made in 2019, though investments made through 2026 can take advantage of growth tax-free. Only a portion of the Port Covington project is expected to be underway by then.

A Goldman spokesman said it is “likely” that the firm will take advantage of the opportunity zone benefits in Port Covington, adding that it has “made no firm decisions about how each component will be financed.”

Margaret Anadu, the head of Goldman’s Urban Investment Group and the lead on the Port Covington investment, recently said of the opportunity zone program: “These are the same neighborhoods that have been suffering since redline started decades and decades ago, pretty much eliminating private investment. … And so we simply have to reverse that. And the only way to reverse that is to start to bring that private capital back into these neighborhoods.”

The Port Covington tract is just 4% black. For it to be included in the program, another community somewhere in Maryland had to be excluded. The ones that the city suggested that were excluded by the governor, for example, are 68% black and have a poverty rate three times higher than Port Covington’s.

There is some evidence suggesting being named an opportunity zone has already been a boon for property owners. An analysis by Zillow found that sale price gains in opportunity zones significantly outpaced gains in eligible tracts that weren’t selected. Real Capital Analytics found that sales of developable sites in the zones rose 24% in the year after the law passed.

Under Armour has said it’s still committed to building its new headquarters on the peninsula, but it’s not clear when that will happen.

Still, other aspects of the once-stalled project finally started moving forward in recent months. After presenting plans for the first section inside the opportunity zone this winter, the project finally got underway on a rainy day in early May of this year.

“The project is real,” Weller said at the kickoff event, which included Anadu, the Goldman Sachs executive, and city and state officials. “The project is starting. We’re open for business.”

 

[Anastasis 23699]

You Filed Returns. The IRS Compiled the Data. Here’s How the New Tax Law Is Working.

 

Text behind the tag, you'll have to click through for the charts.

https://www.wsj.com/articles/you-filed-returns-the-irs-compiled-the-data-heres-how-the-new-tax-law-is-working-11562059803

You Filed Returns. The IRS Compiled the Data. Here’s How the New Tax Law Is Working.

IRS data shows smaller refunds for the upper-middle class, greater use of the standard deduction and a disappearing AMT

 

 

Average refunds for taxpayers making between $100,000 and $250,000 dropped 10%, while average refunds for those between $250,000 and $500,000 rose by 11%. PHOTO: DANIEL ACKER/BLOOMBERG NEWS

By 

Richard Rubin and 

Anthony DeBarros

July 2, 2019 5:30 am ET

 

The first tax-filing season under the new law jostled the upper-middle class, as people making between $100,000 and $250,000 became less likely to receive refunds and more likely to owe money with their returns.

In the aggregate, the tax-filing season looked the same as it did the year before, with 79% of taxpayers getting refunds averaging $2,879, down only slightly from 80% and $2,908. But those totals mask some significant variation by income, according to newly released IRS statistics from tax returns filed through May 23. These preliminary tallies provide the first hard data from the government about the actual refunds, deductions and taxes reported at different income levels in the new system.

SHARE YOUR THOUGHTS

How did the new tax law affect your refund this year? Join the conversation below.

Tax refunds just reconcile what you owe with what you paid throughout the year. Refunds affect how people perceive the tax system and spend money, but they aren’t the same thing as tax cuts. About two-thirds of households received tax cuts under the law Congress passed in December 2017, and about 6% paid more, according to an estimate from the Tax Policy Center. The tax cut showed up in take-home pay—not just in refunds—because the IRS changed the paycheck-withholding tables in early 2018.

Plenty of people with smaller refunds paid less in taxes overall because of the new law.

Still, the tax law has remained mostly underwater in public polls, partly because of opposition to President Trump and the policy changes in the law and, perhaps, partly because people are confused about the effects. An April Gallup poll found that just 14% of Americans thought their taxes went down. 

The fresh data shows that while refund statistics barely budged for lower- and middle-income workers, real movement occurred toward the upper end of the income distribution. Average refunds for taxpayers making between $100,000 and $250,000 dropped 10%, while average refunds for those between $250,000 and $500,000 rose by 11%.

Percent With Refunds

Under the new tax law, people making $100,000 to under $250,000 were less likely to receive tax refunds.Filers earning refunds by adjusted gross incomeSource: Internal Revenue ServiceNote: Based on returns filed and processed through May 23 of each year.

Filing year 2018Filing year 2019Less than $75K$75K - 99K$100K - 250K$250K- 500K$500K - 1 million$1 million or more0%102030405060708090

In response to public concern about people owing money at tax time, the IRS gave partial relief from penalties that normally apply to those who underpaid during the year.

As a result, fewer people owed penalties than in 2018, but those who did were hit harder. The IRS thus far has collected 24% more in penalties from 11% fewer returns.

 

Tax Penalties Rise

Though fewer people owed tax penalties thanin 2018, those who did paid more.Average estimated tax penalties by adjustedgross incomeSource: Internal Revenue ServiceNote: Based on returns filed and processed throughMay 23 of each year.

Filing year 2018Filing year 2019Less than$75K$75K - $100K$100K -$250K$250K-$500K$500K - $1million$1 million ormore$0$1,000$2,000$3,000$4,000

Beyond refunds, the early data provide a first look at the changes brought by the law, which lowered tax rates, expanded the standard deduction, removed per-person exemptions and made a host of other changes.

There is an important caveat here: The figures likely represent less than 90% of returns that will ultimately be filed for tax year 2018 and about 80% of income for the year. That is because 15 million tax filers sought extensions, giving them until as late as mid-October to send in returns.

That group tends to feature taxpayers with complex returns—such as high-income households and business owners—making it harder to draw firm conclusions about capital gains and other items that disproportionately affect them.

Overall, with 0.5% more returns filed through May 23, adjusted gross income rose 5%, reflecting the strong economy, wage growth and changes to what deductions are allowed. Tax liability dropped 6%.

Tax Liability FallsAs a percent of adjusted gross income, tax liability fell for all income groups.Source: Internal Revenue ServiceNote: Based on returns filed and processed through May 23 of each year.

Filing year 2018Filing year 2019Less than $75K$75K - $100K$100K - $250K$250K- $500K$500K - $1 million$1 million or more0%5101520253035

One of the biggest changes in the law nearly doubled the standard deduction. The law also removed some itemized deductions and capped the deduction for state and local taxes at $10,000. Those changes pushed people off itemized deductions and shifted them toward the standard deduction, set at $24,000 for married couples and $12,000 for individuals.

So far, 90% of tax returns have claimed the standard deduction, up from 70% the year before. That is about on target with predictions and represents a simplification that the law’s authors intended.

Standard Deduction

The new tax law brought a sharp increase in the use of the standard deduction, particularly for upper-income earners.Percent using standard deduction by adjusted gross incomeSource: Internal Revenue ServiceNote: Based on returns filed and processed through May 23 of each year.

Filing year 2018Filing year 2019Less than $75K$75K - $100K$100K - $250K$250K- $500K$500K - $1 million$1 million or more0%20406080100Filing year 2019xLess than $75Kx95%

For upper-income households, one of the largest tax cuts was the change to the alternative minimum tax. That is a parallel tax system that features lower top tax rates and disallows some deductions, including state and local taxes. Taxpayers calculate their liability under the regular system and the AMT—and pay whichever is larger.

Before the new tax law, the AMT was the predominant tax system for households making between $250,000 and $500,000, and it showed up on 80% of returns in the prior year’s mid-May data. Now, it is virtually gone for households making under $1 million. For every 62 AMT payers in 2018, there is one in 2019.

AMT Falls

Collections under the alternative minimum tax fell sharply, particularly for those earning less than $1 million.Total AMT collected by adjusted gross incomeSource: Internal Revenue ServiceNote: Based on returns filed and processed through May 23 of each year.

Filing year 2018Filing year 2019Less than $250K$250K- $500K$500K - $1 million$1 million or more$0 million$2$4$6$8$10$12$14Filing year 2018x$250K- $500Kx$11.79 million

Write to Richard Rubin at richard.rubin@wsj.com

 

[Francisco 2.0 32543]

No one saw this coming at all.  What a total surprise.

https://www.nytimes.com/2019/11/17/business/how-fedex-cut-its-tax-bill-to-0.html

 

Quote

In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.

The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts. “If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment,” he said on an August 2017 radio show hosted by Larry Kudlow, who is now chairman of the National Economic Council.

 

Quote

Four months later, President Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement. FedEx reaped big savings, bringing its effective tax rate from 34 percent in fiscal year 2017 to less than zero in fiscal year 2018, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed, as Mr. Smith said businesses like his would.

 

Quote

Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts.

 

Spoiler

FedEx’s financial filings show that the law has so far saved it at least $1.6 billion. Its financial filings show it owed no taxes in the 2018 fiscal year overall. Company officials said FedEx paid $2 billion in total federal income taxes over the past 10 years.

As for capital investments, the company spent less in the 2018 fiscal year than it had projected in December 2017, before the tax law passed. It spent even less in 2019. Much of its savings have gone to reward shareholders: FedEx spent more than $2 billion on stock buybacks and dividend increases in the 2019 fiscal year, up from $1.6 billion in 2018, and more than double the amount the company spent on buybacks and dividends in fiscal year 2017.

A spokesman said it was unfair to judge the effect of the tax cuts on investment by looking at year-to-year changes in the company’s capital spending plans. 

“FedEx invested billions in capital items eligible for accelerated depreciation and made large contributions to our employee pension plans,” the company said in a statement. “These factors have temporarily lowered our federal income tax, which was the law’s intention to help grow G.D.P., create jobs and increase wages.” 

FedEx’s use of its tax savings is representative of corporate America. Companies have already saved upward of $100 billion more on their taxes than analysts predicted when the law was passed. Companies that make up the S&P 500 index had an average effective tax rate of 18.1 percent in 2018, down from 25.9 percent in 2016, according to an analysis of securities filings. More than 200 of those companies saw their effective tax rates fall by 10 points or more. Nearly three dozen, including FedEx, saw their tax rates fall to zero or reported that tax authorities owed them money.

From the first quarter of 2018, when the law fully took effect, companies have spent nearly three times as much on additional dividends and stock buybacks, which boost a company’s stock price and market value, than on increased investment. 

The law cut the corporate rate to 21 percent from 35 percent, and allowed companies to deduct the full cost of new equipment investments in the year that they make them. Those cuts stimulated the American economy in 2018, helping to push economic growth to 2.5 percent for the year and fueling a boost in hiring. Business investment rose at an 8.8 percent rate in the first quarter of 2018, and was nearly as strong in the second quarter.

But the impact dwindled quickly. 

In the summer, the economy grew at just 1.9 percent and business investment fell 3 percent, including a 15.3 percent plunge in spending on factories and offices. Over the spring, companies spent less on new investments, after adjusting for inflation, than they had in the winter.

Overall business investment during Mr. Trump’s tenure has now grown more slowly since the tax cuts were passed than before.

Some conservative economists and business leaders say the effects of the tax cuts were undercut by uncertainty from Mr. Trump’s trade war, which is slowing global growth and prompting companies to freeze projects. Other economists say the fizzle is predictable because high tax rates were not holding back investment.

“It did provide a short-term boost, but it wasn’t the big response that many people expected,” said Aparna Mathur, an economist at the conservative American Enterprise Institute, who recently concluded that the 2017 law has not meaningfully changed investment patterns in America.

Mr. Smith, 75, a former Marine who built FedEx from a small package delivery service into a global logistics giant, was no stranger to pressing for lower taxes. He tried, without success, to get President Barack Obama to cut the corporate rate. But with Mr. Trump’s ascension, the corporate chief began a one-man campaign to convince Washington that now was the moment. He met with the president-elect at Trump Tower on Nov. 17, just days after the election, and appeared alongside the president at official events.

In a conference call with analysts the month after Mr. Trump’s election, Alan Graf, FedEx’s chief financial officer, called the prospect of a 20 percent corporate tax rate “a mighty fine Christmas gift.”

Mr. Smith teamed up with his competitor, David Abney, the chairman and chief executive of UPS, to push for a tax overhaul, including jointly writing an op-ed in The Wall Street Journal.

“Fred and I even jointly had some meetings about this with key people, and we were both pushing pretty hard,” Mr. Abney said in a recent interview. 

FedEx spent $10 million on lobbying in 2017, in line with previous spending, with much of it focused on tax issues, according tofederal records. Its team pushed hard to shape the bill behind the scenes, meeting regularly with House and Senate committee staff who were writing the provisions. 

Mr. Smith met with Mr. Trump and Vice President Mike Pence in February 2017, and on May 26 he spoke on the phone with Steven Mnuchin, the Treasury secretary, according to Mr. Mnuchin’s public calendar. 

Eight months after Congress passed the law, Mr. Trump celebrated the tax cuts by hosting Mr. Smith and other business leaders at a dinner at his Bedminster, N.J., golf club. He singled out Mr. Smith several times, bantering with him about a term paper that Mr. Smith had written while a student at Yale. The paper formed the basis for the creation of FedEx.

The next week, Mr. Smith boasted of his company’s influence on the law in the company’s annual report, which noted that FedEx is “investing more than $4.2 billion in our people and our network as a result of the tax act.”

FedEx increased the size of its work force by around 4 percent in its 2018 fiscal year and around 7 percent in its 2019 fiscal year. 

The company also accelerated previously scheduled wage increases for hourly employees by six months. It gave performance-based pay to other managers and said it would invest $1.5 billion over seven years in its Indianapolis shipping hub. The company also bought 24 Boeing freight jets for $6.6 billion, a purchase officials say would not have happened without tax cuts. 

But the company ended its 2018 fiscal year having spent $240 million less on capital investments than it predicted it would in December 2017, shortly before the tax cuts passed. The company’s capital spending declined by nearly $175 million in fiscal 2019.

This year, the company cut back employee bonuses and has offered buyouts in an effort to reduce labor costs in the face of slowing global growth. The company has also added to its pension fund, a move that carried the benefit of reducing its tax liability even further. 

FedEx reduced its tax liability in part by taking advantage of a provision in the law that allowed companies to immediately deduct the value of any capital investments they make in a given year. But its biggest gains were from the cut in the corporate rate. FedEx had been carrying a large amount of future tax liabilities on its balance sheet — and when the corporate rate fell to 21 percent, those liabilities shrank too. 

“Something like $1.5 billion in future taxes that they had promised to pay, just vanished,” said Matthew Gardner, an analyst at the liberal Institute on Taxation and Economic Policy in Washington. “The obvious question is whether you can draw any line, any connection between the tax breaks they’re getting, ostensibly designed to encourage capital expenditures, and what they’re actually doing. And it’s just impossible to know.”

 

 

[zork 629]

The money going out as spending is expanding faster than the money coming in which is still growing even with the tax cuts.  Why not cut spending to reflect the actual money coming in each year?   At least do zero based budgeting year to year, no more than the previous year, unless there is surplus to handle more spending?

Money coming in(with some history):

• FY 2020 - $3.64 trillion, budgeted.
• FY 2019 - $3.44 trillion, estimated.
• FY 2018 - $3.33 trillion.
• FY 2017 - $3.32 trillion.
• FY 2016 - $3.27 trillion.
• FY 2015 - $3.25 trillion.
• FY 2014 - $3.02 trillion.
• FY 2013 - $2.77 trillion.
• FY 2012 - $2.45 trillion.
• FY 2011 - $2.30 trillion.
• FY 2010 - $2.16 trillion.
• FY 2009 - $2.10 trillion.
• FY 2008 - $2.52 trillion.
• FY 2007 - $2.57 trillion.
• FY 2006 - $2.4 trillion.
• FY 2005 - $2.15 trillion.
• FY 2004 - $1.88 trillion.
• FY 2003 - $1.72 trillion.
• FY 2002 - $1.85 trillion.
• FY 2001 - $1.99 trillion.
• FY 2000 - $2.03 trillion.

https://www.thebalance.com/current-u-s-federal-government-spending-3305763

[Bruh Man 3160]

This comment is so on point. 

Quote

So let me get this straight.  A company whose business is putting thousands of trucks and huge numbers of miles on our crumbling roadways pays absolutely nothing to maintain the roads they are trashing?  Brilliant!

 

[Anastasis 23699]

7 hours ago, Bruh Man said:

This comment is so on point. 

 

The really amazing thing is how fedex avoided using any gas while operating all those trucks and putting all those miles on the roads. 

[Incredulity 11861]

https://www.dailywire.com/news/new-york-times-accuses-fedex-of-not-paying-taxes-fedexs-response-is-priceless

 

“The New York Times published a distorted and factually incorrect story on the front page of the Sunday, November 17 edition concerning FedEx and our billions of dollars of tax payments and billions of dollars of investments in the U.S. economy,” Smith wrote. “Pertinent to this outrageous distortion of the truth is the fact that unlike FedEx, the New York Times paid zero federal income tax in 2017 on earnings of $111 million, and only $30 million in 2018 – 18% of their pretax book income.  Also in 2018 the New York Times cut their capital investments nearly in half to $57 million, which equates to a rounding error when compared to the $6 billion of capital that FedEx invested in the U.S. economy during that same year.”

“I hereby challenge A.G. Sulzberger, publisher of the New York Times and the business section editor to a public debate in Washington, DC with me and the FedEx corporate vice president of tax,” Smith continued. “The focus of the debate should be federal tax policy and the relative societal benefits of business investments and the enormous intended benefits to the United States economy, especially lower and middle class wage earners.”

Smith concluded, “I look forward to promptly hearing from Mr. Sulzberger and scheduling this open event to bring further public awareness of the facts related to these important issues.”

[Incredulity 11861]

18 minutes ago, Anastasis said:

The really amazing thing is how fedex avoided using any gas while operating all those trucks and putting all those miles on the roads. 

TIL income tax pays for road maintenance.

 

[David Dennison 19441]

It's OK, y'all. FedEx helped grow the U.S. economy so other people could pay income taxes.

[SquishMitten 10493]

Trickle up economy at its finest!

[Fudge Nuggets 19407]

2 hours ago, Anastasis said:

The really amazing thing is how fedex avoided using any gas while operating all those trucks and putting all those miles on the roads. 

You see a lot of Fedex trucks filling up at your local Stop 'N Go?

[zork 629]

9 minutes ago, Fudge Nuggets said:

You see a lot of Fedex trucks filling up at your local Stop 'N Go?

federal aviation fuel tax is:

 

old article about how fed ex invests in their fleet to reduce fuel use, innovate in hybrids, from 2013

slightly more recent article that has numbers on truck gallons of fuel usage, etc, from 2016

etc etc

Edited November 18, 2019 by zork

[Incredulity 11861]

10 minutes ago, Fudge Nuggets said:

You see a lot of Fedex trucks filling up at your local Stop 'N Go?

You honestly believe Fleet vehicles don't pay fuel taxes?  Derp.

[CO Horn 172]

You argue that 44% of Americans pay no income tax, which is a problem, but it's not a problem that FedEx pays no income tax because they pay fuel taxes?

You cannot have it both ways.  

[Anastasis 23699]

2 minutes ago, CO Horn said:

You argue that 44% of Americans pay no income tax, which is a problem, but it's not a problem that FedEx pays no income tax because they pay fuel taxes?

You cannot have it both ways.  

Nobody has argued that.

 

What a couple people have pointed out is that the comment "A company whose business is putting thousands of trucks and huge numbers of miles on our crumbling roadways pays absolutely nothing to maintain the roads they are trashing?  Brilliant!" is totally nonsensical. 

[Incredulity 11861]

1 minute ago, CO Horn said:

You argue that 44% of Americans pay no income tax, which is a problem, but it's not a problem that FedEx pays no income tax because they pay fuel taxes?

You cannot have it both ways.  

Who made that claim?  No one.

 

[zork 629]

5 minutes ago, Incredulity said:

Who made that claim?  No one.

 

need to subtitle this site as strawhorns.com, we put extra straw in our strawpersons. 

 

/aside just noticed typing that out that it might deflame, disengage, dismantle, the use of 'whorns' as well by the typical rival dumbshit.

[wildcat09 29556]

FedEx going with the "DEBATE ME, COWARD!" response was certainly not expected.

[Brisketexan 106617]

3 minutes ago, Anastasis said:

Nobody has argued that.

 

What a couple people have pointed out is that the comment "A company whose business is putting thousands of trucks and huge numbers of miles on our crumbling roadways pays absolutely nothing to maintain the roads they are trashing?  Brilliant!" is totally nonsensical. 

Saying they pay absolutely nothing is nonsensical.

Saying they don't pay their way, when all they pay is fuel and other similar taxes, is spot-on.

Quote

The Highway Trust Fund receives roughly 85 to 90 percent of its revenue from excise taxes on motor fuel, commonly known as the “gas tax.” Since 1993, fuel tax rates have been fixed at 18.4 cents per gallon for gasoline, and 24.4 cents per gallon for diesel. Taxes on tires and heavy vehicles (trucks) make up the rest of the fund’s income. Because the federal gas tax is not pegged to inflation and has not been raised since 1993, the purchasing power of the revenue has eroded over time — over 40 percent less today than in 1993. What’s more, rising construction costs and the growing needs of an aging highway system have placed a greater strain on the fund, resulting in recurring funding shortfalls in recent years.

.....

Those funding shortfalls have generally been filled by transfers from the Treasury’s general fund; those transfers have shifted a total of $143.6 billion to the HTF since 2008, including $70 billion authorized in the Fixing America’s Surface Transportation Act in 2015. 

Regular old tax dollars pay a crapload of the costs of building and maintaining our highway infrastructure.  And Fedex is paying [checks notes] not one penny of those.

Come on, the tax cuts as an economic stimulus are indefensible at this point.  "Trickle down" economics is indefensible at this point.  Every time we've tried such an approach, the effect on capex and wages has been.....jack shit.

[zork 629]

Just now, wildcat09 said:

FedEx going with the "DEBATE ME, COWARD!" response was certainly not expected.

Seems to me the argument is more of: you use the tax code rules as well, fucktard.