Tag Archives: corporate tax cut

The Applause Line You Won’t Hear At Trump’s Minnesota Tax Day Rally

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President Donald Trump is coming to Minnesota today.  That means we’ll be treated to lots of bullying of Representative Ilhan Omar, crowing about the “exoneration” that the Special Counsel specifically has said was not an exoneration, and vilifying of families fleeing desperate conditions for a better life in America.

And you thought there was a cold wind blowing into Minnesota last week?

Since it’s Tax Day, we’ll also be hearing lots of bragging from the President about his tax cut law.  But you probably won’t hear him mention that his tax law, which was dutifully supported by every Republican in the Minnesota congressional delegation, led to twice as many corporations paying $0 in taxes compared to the period before the Trump tax cuts.  Here is an excerpt from an NBC analysis.

At least 60 companies reported that their 2018 federal tax rates amounted to effectively zero, or even less than zero…according to an analysis released today by the Washington, D.C.-based think tank, the Institute on Taxation and Economic Policy (ITEP). The number is more than twice as many as ITEP found roughly, per year, on average in an earlier, multi-year analysis before the new tax law went into effect.

Among them are household names like technology giant Amazon.com Inc. and entertainment streaming service Netflix Inc., in addition to global oil giant Chevron Corp., pharmaceutical manufacturer Eli Lilly and Co., and farming and commercial equipment manufacturer Deere & Co.

“Instead of paying $16.4 billion in taxes, as the new 21 percent corporate tax rate requires, these companies enjoyed a net corporate tax rebate of $4.3 billion, blowing a $20.7 billion hole in the federal budget last year.”

“The specter of big corporations avoiding all income taxes on billions in profits sends a strong and corrosive signal to Americans: that the tax system is stacked against them, in favor of corporations and the wealthiest Americans,” Gardner wrote in the report.”

The next time you hear Trump or other Republicans say there isn’t enough money to help seniors, children, disaster victims, patients, farmers, disabled people, veterans, students, parents, and dislocated workers, remember this report and these lavish corporate handouts that are blowing an enormous hole in the federal budget.

I’m pretty sure “and we doubled the number of corporations paying zero taxes” is not likely to be an applause line that we will hear from President Trump at today’s Minnesota Tax Day rally.  So I thought I’d do the President a favor and promote that particular accomplishment here.

Why Are Minnesota Republicans Cutting Corporate Taxes?

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Yesterday, Minnesota House Republicans–following the lead of President Trump and congressional supporters like Representatives Lewis, Emmer and Paulsen–enacted legislation to lower Minnesota’s corporate taxes from 9.8 to 9.06 in 2020.

On most levels, cutting Minnesota’s corporate taxes makes no sense.

BAD POLITICS. Minnesota House Republicans certainly aren’t cutting corporation’s taxes because most of their constituents want it. By an overwhelming three-to-one margin, a Pew Research survey recently found that Americans say corporate taxes at the federal level should be raised (52%) or kept the same (21%), as opposed to lowered (24%), as Minnesota House Republicans are doing. There’s no reason to believe that Minnesotans would view cutting corporate taxes at the state level much differently than Americans do at the federal level.

BAD FOR NECESSARY INVESTMENTS. Minnesota Republicans aren’t cutting corporate taxes to help help finance necessary and popular state investments in things such as infrastructure, education, and health protections.  After all, corporate tax cuts will significantly reduce state funding available for such investments.

BAD FOR MOST CONSTITUENTS. If Minnesota Republicans are cutting those corporate taxes because they believe doing so will help their constituents, they should dig more deeply into the facts. We’ve already seen at the federal level that the benefits of federal corporate tax cuts are mostly staying with corporations and wealthy people. As CNN Money recently reported:

The White House has celebrated the tax cut bonuses unveiled by the likes of Walmart (WMT), Bank of America (BAC) and Disney (DIS).

Yet shareholders, not workers, are far bigger direct winners from the Tax Cuts and Jobs Act of 2017.

American companies have lavished Wall Street with $171 billion of stock buyback announcements so far this year, according to research firm Birinyi Associates. That’s a record-high for this point of the year and more than double the $76 billion that Corporate America disclosed at the same point of 2017.

Wall Street loves buybacks because they tend to boost the share price in part by inflating a key measure of profitability. In just the past three days, Cisco (CSCO), Pepsi (PEP) and drug maker AbbVie (ABBV) have promised a total of $50 billion of buybacks.

“It’s the largest ever — and nothing has really changed, except the tax law,” said Jeffrey Rubin, director of research at Birinyi Associates.

Conservative Republican Senator Marco Rubio summarized the situation well when he recently told The Economist “there’s no evidence whatsoever that the money’s been massively poured back into the American worker.”

Federal corporate tax cuts are primarily good for a very small slice of the wealthiest citizens.  The Center for Budget and Policy Priorities analysis finds:

“Mainstream estimates conclude that more than one-third of the benefit of corporate rate cuts flows to the top 1 percent of Americans, and 70 percent flows to the top fifth. Corporate rate cuts could even hurt most Americans since they must eventually be paid for with other tax increases or spending cuts.[1]

While this analysis focuses on federal corporate tax cuts, it’s reasonable to assume that the same is true with state corporate tax cuts.

GOOD FOR CAMPAIGN DONATIONS. At the same time, cutting corporate taxes would ingratiate Minnesota House Republican legislators to large campaign donors in corporations.

I’ll let you reach your own conclusion about what is going on here.