From the Thursday edition of the Morning Jolt:
“Probably one of the worst bills in the history of the United States of America… The debate on health care is like death. This is Armageddon.” – House Minority Leader Nancy Pelosi, describing the Republican tax cut bill, December 4.
Ladies and gentlemen, witness the horror of our Armageddon:
In the hours after Congress approved the GOP tax cut plan, a handful of companies jumped to announce plans to share some of the proceeds on their employees and spend on infrastructure. Boeing was first out of the gate, followed by AT&T, which said it would give more than 200,000 unionized employees a special bonus of $1,000 once the tax bill is signed. The company also said it would increase its capital expenditures by $1 billion.
Both Fifth Third Bancorp and Wells Fargo followed, saying they would raise their minimum wage to $15 an hour. Fifth Third said it would also give workers a bonus, and Wells Fargo said it would give $400 million to community and nonprofit organizations next year.
Comcast, which owns CNBC parent NBCUniversal, said it would pay 100,000 frontline and non-executive employees special $1,000 bonuses. The company also said it is making the move because of the FCC’s recent change in broadband rules and tax reform. It also said it plans to spend well in excess of $50 billion over the next five years on infrastructure improvements.
“This is exciting stuff. This is good. This is not just a whole bunch of guys saying I can buy back a lot of stock here and jazz up my numbers through financial engineering. This is a bunch of business leaders saying we can use this tax benefit to grow our company, keep our loyal employees and assist the community,” said Dick Bove, banking analyst at Vertical Group.
What’s fascinating is how many commentators you will see who will offer variations of A) “This is just one/two/three/four/five companies!” B) “$1,000 isn’t really that much!” C) The companies and corporate executives will get a lot more!” and so on. They can’t look at announcements like this and say, “oh, good. A lot of workers will get some more money in their pockets as 2018 begins, this can only be a good thing.”
In a better, more reasonable, less reflexively partisan world, we would all be willing to applaud when an idea we didn’t support has at least one good effect.
Do you notice the irony of a giant tax cut motivating big companies to institute a $15/hour minimum wage for their workers? Could we at least get an “Amen!” from the Fight for 15 people?
Even if these companies are making these moves with less-than-noble motives, wanting good publicity or to ingratiate themselves with the administration… so what? Do you think the workers getting those bonuses will feel like they’re tainted? “I’m going to tear up my bonus check, I think they’re just trying to use me for a photo-op.”
Something to keep an eye on in the coming days are people who claim they’re getting socked with a big tax hike under the plan who don’t or won’t spell out how they reached that conclusion. Yesterday I encountered a Twitter user living in Detroit who insisted, “many of us pay way more than $10k in state and local taxes and don’t reach the AMT limit and only get a slight break on tax rate.”
For 2017, the alternative minimum tax kicks in at $54,300 for those filing singly and $84,500 for those married and filing jointly. If you’re under that level, your income tax rate is going down three percentage points under the new system both single and married taxpayers. Plus, if you’re making less than the AMT limit, I’m trying to figure out how you can possibly be paying “way more than $10,000 in state and local taxes.”
Maybe someone could find themselves with a bad tax bill if they make a modest salary but own a lot of property and get hit with property taxes. Michigan has a 4.25 percent state income tax, there’s a 2.4 percent Detroit income tax. Wayne County has a property tax that is complicated to calculate but is pretty high, averaging out to 2.6 percent. The property tax is high, but also remember that Detroit real estate is relatively cheap. How many people own non-revenue-generating high-value real estate in high-property tax jurisdictions, but their taxable earnings are below the AMT limit?
Liberal Sirius XM host Dean Obeidallah declared on Twitter, “Just spoke to a friend in Massachusetts- the GOP tax plan will raise their taxes by $10,000 a year because they can no longer deduct state and local taxes from federal income. For a family of 5 that is very painful tax hike.”
It’s difficult to determine without this unnamed person’s specific figures, but I don’t think that adds up; at the very least, they’re in a really unusual set of circumstances.
Remember, if you’re used to deducting $20,000 in state and local taxes, it doesn’t mean your tax bill goes up by $10,000. It means your taxable income goes up by $10,000. To calculate out to a tax hike of $10,000, this unnamed friend must have an unbelievably high state and local tax bill. (Remember, the average state and local tax deduction for a filer in New York City is $24,000; this unnamed friend would have to be deducting way more than that to add up a $10,000 increase in taxes due. At 5.1 percent, Massachusetts’ income tax rate is actually on the lower end of the national spectrum.) Again, maybe this person has an enormous property tax bill, but it’s hard to believe that the reduction in this taxpayer’s income tax rate wouldn’t offset the increase in taxable income without the SALT deduction. (Keep in mind, this family of five, with presumably three dependents, just had their child tax credit increase by $400 per child, or $1,200 in total.)
In other words, in pretty rare circumstances, the changes in the tax bill could calculate out to a net tax hike. It’s just odd that all of those people happen to be the unnamed friends of liberal commentators.