Building on Tax Reform with 2.0

House Committee on Ways and Means Chairman Kevin Brady should be applauded for working to build on the success of tax reform by introducing the framework for “Tax Reform 2.O.” Forbes outlined how this plan will expanded on the achievements of tax reform that was passed in December.

The plan would make the tax cuts for individuals permanent. This would provide benefits for small business for years to come and would allow them to invest in their businesses without fear that their rates could be increased when the cuts expire.

Moreover, the framework would provide huge benefits to new businesses though initial and expanded expensing. It will work to remove barriers to the creation of new businesses, which will undoubtedly have a positive impact on the US economy.  There will also be many benefits for individuals and families.

We hope that Congress will come together and work to strengthen tax reform by passing this framework.

Tax Reform Helping to Drive Philanthropy

On May 9, aerospace company Boeing announced details for $54 million in “grants and philanthropic sponsorships to nonprofits in the U.S. and around the globe” as part of the “company’s pledge to invest in local communities following the enactment” of tax reform legislation (which passed Congress and was signed into law by President Trump late last year). The company’s investments include “new or accelerated partnerships with organizations that improve STEM education, enhance transition and health services for veterans and their families, and enrich local communities.”

“This investment is yet another example of how Boeing is putting tax reform to work,” said Boeing chairman, President, and CEO Dennis Muilenburg, “Already, we have expanded our ‘Dollars for Doers’ matching program to reward employees who give their time and resources in support of causes important to them. With these additional charitable and philanthropic contributions, we are on track to surpass $200 million in total community giving in 2018.”

But Boeing is not the only organization using the benefits of tax reform to reinvest in communities and support philanthropic efforts. Below are just a few examples of companies leveraging tax reform to increase their charitable giving:

  • In December, Winston-Salem, North Carolina-based BB&T announced that, “in light of the new corporate tax rate deductions, BB&T’s Executive Management team has made the decision to share some of the related benefits,” including a donation of “$100 million to BB&T’s philanthropic fund to support charitable organizations in our communities.”
  • The Associated Press reported in February that Durham, North Carolina-based Blue Cross and Blue Shield of North Carolina would use “its windfall from the new federal tax cut” to “give charities $40 million.”
  • In January, Louisville, Kentucky-based Brown-Forman Corporation announced it would create a charitable foundation with a $60 million to $70 million contribution as part of a series of “capital deployment actions” that, according to the company’s CEO, “underscore the strength of the company’s balance sheet and health of our business, and are augmented by the anticipated benefits due to tax reform.”
  • According to the Milwaukee Journal Sentinel, in February, Madison, Wisconsin-based CUNA Mutual Group announced it “is making its largest contribution ever to its philanthropic foundation, a $20 million donation made possible in part by federal tax reform.”

Passage of the Tax Cuts and Jobs Act (TCJA) has been good on so many levels—for the economy, for working families, for small businesses. And for the charities that support our communities.

Companies Reinvesting in Growth

Bloomberg Markets reports that, after “months of heated debate over whether companies would hand the biggest tax break in three decades back to shareholders or reinvest it in their businesses, there’s finally some hard data.”

Of the 130 S&P 500 companies that “have reported results in this earnings season,” capital spending increased by an incredible 39 percent. That’s “the fastest rate in seven years.” And guess what? Returns to shareholders “are growing at a much slower pace, with net buybacks rising 16 percent,” and dividends seeing “an 11 percent boost.”

The data serves as “a fresh rebuttal to those who warned that hundreds of billions of dollars of tax relief will head directly to the stock market and be harvested by shareholders already fattened by a nine-year bull market.”

While so-called “stock buybacks”—when “a company buys its own shares off the market” to reduce available stock to increase its value for shareholders—did get “a boost from the windfall,” companies also “increased the rate at which they unleash cash for building factories and upgrading equipment.” The kinds of things that create jobs and drive economic growth.

As the Tax Foundation’s Erica York wrote recently, such an “increase in how much businesses are investing is good news, as business investment is a determinant of the long-term size of the economy,” because the “Increased capital expenditures can increase the size of the stock of capital, such as plants, machinery, and equipment,” which over the long term “leads to higher levels of productivity, employment, output, and incomes.”

And while York also notes it “is not yet clear that this data is related” to the Tax Cuts and Jobs Act (TCJA), the law’s “changes are all things one would expect,” such as reducing the corporate tax code from 35 percent to 21 percent.

Tax reform is working for all of us—Main Street, Wall Street, and every other “street” in our economy.

Tax Reform Lowering Utility Bills? Yup.

It turns out that the Tax Cuts and Jobs Act (TCJA)—passed late last year by Congress and signed into law by President Trump—will not only save hard-working Americans money in their paychecks and at tax time.

It will also lower how much many individuals and families pay for electricity:

In January, Topeka, Kansas-based Westar Energy made an important announcement:

“Today Westar Energy announced it will file a request before the Kansas Corporation Commission (KCC) to reflect in its electricity rates the full amount of tax savings from the change in the federal tax law.” 

The press release also specifically noted that the “Tax Cuts and Jobs Act, which decreased the corporate tax rate from 35 percent to 21 percent, was signed into law on Dec. 22, 2017, and became effective Jan. 1, 2018.” 

“We agree with the KCC Staff and others that all these tax benefits should go to our customers,” said Mark Ruelle, President and CEO of Westar. “This application to update rates starts that process.”

But Westar isn’t the only utility passing along tax reform savings to consumers.

Ameren Illinois also announced that its “electric customers could save an average of $2.50 to $3.00 per month in 2018 and natural gas customers could save an average of $1 per month if the Illinois Commerce Commission (ICC) approves the company’s plan to pass savings from the recently approved federal tax cut legislation back to its customers.” 

“Under the new tax plan, Ameren Illinois’ effective tax rate will decrease by nearly 13%,” said Richard Mark, Chairman and President of Ameren Illinois. “The plan we have filed with the ICC gives us the ability to expedite the return of these savings to our customers.”

And these are just two examples out of many! Tax reform is helping so many people in so many ways—even ones we might never have expected.

Rep. Brady Very Bullish On Positive Impacts of Tax Reform

On Monday, April 16—the day before Tax Day—House Ways and Means Committee Chairman (and architect of the Tax Cuts and Jobs Act) Rep. Kevin Brady (R-TX) penned an excellent piece in USA Today about Americans filing their taxes for the last time under the previous, anti-growth tax code.

In the piece, Brady writes that on Tuesday, April 17, “we Americans file our taxes—for the last time—under the old, broken tax code…Goodbye and good riddance to that outdated, monstrosity of a tax code that took too much of your money, sent our American jobs overseas, and kept our economy so slow many workers didn’t see a pay raise for a decade or more.”

Brady says that, going forward, Americans “should all take comfort knowing that this time next year they’ll file under the new, modern tax code that lowers taxes for families and local businesses—and leapfrogs America to the lead pack among the world’s tax codes.”

What does this mean for you and me? Well, “starting now, individuals and married couples will keep more of their hard-earned money and take home a bigger paycheck,” in the form of “lower tax rates across the board and a standard deduction that has been nearly doubled.” A typical family of four earning the median annual income of $73,000 can expect to see a “total tax cut of $2,059.” And “for a newlywed couple earning $61,000 or less, they won’t pay a cent in federal income tax.”

Brady adds that, under the new tax code, we’re “already seeing more jobs, larger paychecks and new investments in the USA—but the best is yet to come” because the new tax code “no longer runs roughshod over hardworking families or Main Street businesses, but instead embodies the principle that Americans know how to spend their own money better than a bureaucrat sitting in a Washington office.”

“It’s now undeniable that tax reform is boosting the economy, and that American families are already benefiting,” says Brady. “More than 400 companies—and counting—have announced pay raises, bonuses and investments in their workers and businesses,” and “more than 4 million Americans are seeing pay raises and new benefits,” and wages “are growing and unemployment is low—with U.S. jobless claims at their lowest level since 1973.”

Specific to small businesses, Brady says that “thanks to tax reform, we now have lower tax rates for local businesses—including a first-ever small business deduction to protect 20% of their income from taxes.”

This means “small businesses, where almost half of America’s private-sector workforce is employed, will have more money to invest, hire and grow in their community.”

“It should come as no surprise that small business optimism is now at the highest level since 1983,” he adds. No surprise at all!