From the last Morning Jolt until after Christmas:
More Armageddon Updates
In keeping with yesterday’s grim and spirit-breaking news, here’s another look at how “Armageddon,” as House Minority Leader Nancy Pelosi called it, is sweeping the country:
New Braunfels-based Rush Enterprises is planning to give each of its employees a $1,000 bonus after President Donald Trump signs the tax reform bill into law.
The commercial truck dealer said all of its approximately 6,600 U.S. employees will receive the one-time payout — which will cost about $6.6 million.
“You’ve got a choice — we could’ve kept it and stuffed it in the company bank account or coffers, or we can share it with the people,” said Rush Enterprises’ Chief Financial Officer Steven Keller. “We chose to share it with the people because it’s the right thing to do.”
Rush Enterprises President and CEO W.M. “Rusty” Rush said in a statement “we believe tax reform to be beneficial for Rush Enterprises, our communities and overall economic growth.”
Associated Bank said Thursday it will boost its minimum hourly wage to $15 and pay workers a $500 bonus when the recently passed federal tax reform is signed, making it the first major Wisconsin firm to announce it is joining the list of companies saying their employees will directly benefit from the legislation.
The Green Bay-based bank, the largest financial institution headquartered in the state, said it will raise its minimum wage to $15 an hour from $10 — a 50% boost — and distribute the one-time bonus to all hourly, non-commissioned employees once the tax legislation is signed into law.
The company said the moves would affect about 55% of its workers. Associated has about 4,400 employees, with 3,400 of them in Wisconsin.
Idaho health care and home products company Melaleuca Inc. announced Thursday that it will be the latest major business to give its workers bonuses in response to President Donald Trump’s tax cuts.
Melaleuca CEO Frank VanderSloot said in a phone interview that his 2,000 workers will get a one-time bonus of $100 for every year they have worked at the company. On average, Melaleuca employees stay at the company eight years – which would result in an $800 bonus. The company also has 147 employees who have worked for VanderSloot for 20 years or more.
“We’re going to be able to have quite a few substantial dollars after taxes,” VanderSloot said. “I suspect we’re one of the largest taxpayers in the state, so we’re going to have some more dollars to spread around. That money should go to the people who built the company.”
Royal Hawaiian Heritage Jewelry has been in business for about 40 years.
And owner Jackie Breeden is hoping a sweeping tax overhaul approved by Congress and headed to the president’s desk will help her expand operations beyond her stores at Pearlridge Center and on Bishop Street, and a single neighbor island outlet in Kona.
“I’m from Kauai so I would like to open up a shop back on the island of Kauai and on the west side of Honolulu as well, and be back in Maui. Before we were on all the islands,” she said.
Reuters business reporters notice what I was discussing yesterday: it’s likely that the changes to the Alternative Minimum Tax will balance out or offset the effects of the cap on the deductions for state and local taxes for those in high-tax blue states. That change won’t be as devastating for Californians as the bill’s critics contend – or at least for a significant chunk of them.
The new $10,000 cap on state and local tax deductions will have a less dramatic effect than feared because such deductions in many cases had already been rendered moot by the alternative minimum tax (AMT), a mechanism for assuring that the well-heeled pay at least 26 percent of their income in taxes.
“There is a lot of noise about workers in California, New Jersey, New York and Illinois (facing higher taxes), but 80 percent of our clients there were already paying the alternative minimum tax so they don’t benefit from the state and local deductions,” said Jack Meccia, a tax associate at financial planning firm Vestboard, which works with several hundred individuals in tech.
The new law alters the AMT in a way that vastly reduces the number of people who have to pay it, from more than 5 million to an estimated 200,000 next year, according to the Tax Policy Center. The AMT dynamics, combined with reduced overall tax rates and the doubling of the standard deduction to $24,000 should hold most Bay Area tax bills steady, said Bob McGrath, tax director at accounting firm Burr Pilger Mayer.
Meanwhile, down under in Australia, they’re worried that businesses will shift operations and investors will refocus upon the United States because of the lower tax laws.
The US company tax rate, however, is critical because as the world’s largest economy, a cut would result in investment and capital flowing back into the country at the expense of nations such as Australia, whose higher tax rates would make it uncompetitive and less attractive as an investment option.
Scott Morrison told The Australian that the Treasury analysis confirmed the IMF forecasts, which at the beginning of the year had been only hypothetical.
The Treasurer said they were now a reality. “The Trump tax cuts are coming. If we fail to respond, they will take Australian jobs, investment and wages with them,” Mr Morrison said.
Now, are companies looking for a particular tax advantage by announcing all of these bonuses immediately, and putting them into effect before the end of the year? Yes, they are!
Making the payment now would let AT&T record the expense in 2017, resulting in a $70 million deduction under the current 35% tax rate. Once the new tax rate is in effect in 2018, the bonus expense would mean a $42 million deduction. Should the president sign the bill after Dec. 31, AT&T stands to lose 40% of the tax deduction it could have claimed.
Similar calculations are currently being made for other companies that have pledged tax-bill bonuses, charitable donations or other year-end expenses ahead of the changes in the tax law.
I concur with Frank Fleming. “There [are] lots of good reasons to oppose the tax cuts, but the arguments we’re seeing now reveal that a lot of the people who opposed it are just idiots who opposed it for bad partisan reasons.”
In case you’re wondering here are the good reasons: this new tax structure is almost certain to worsen deficits over the next ten years, we still have a debt problem, and the government isn’t controlling spending at a level that could justify big cuts in revenue. The bill really didn’t do much for tax simplification, and you could argue the tax code is even more complicated now. (Either Ivanka Trump didn’t pay attention in her briefings, or someone needed to tell her that the vast majority will not be doing their taxes on a form as small as a postcard, and that the tax changes will go into effect starting next year, not retroactive to the beginning of this year. Your taxes that you file in April 2018 will be under the old tax rules, not the new ones.) The corporate tax rate will go down from 35 to 21 percent; the U.S. probably could have gotten similar benefits in international competitiveness just by reducing it to 24 percent or so. It would have been nice to see the child tax credit get more than a $400-per-child boost, and it would have been better to include Senator Mike Lee and Marco Rubio’s “expanded child tax credit that was refundable against the full payroll tax, meaning that the parents who do not make enough to have income tax liability would get their payroll taxes back up to the value of the credit for each child.”