Industries Can Start Counting Their Benefits from Tax Law Craft Breweries, Retailers and Those in Corporate Finance among Winners

By Wiseman, Paul | The Spokesman-Review (Spokane, WA), December 27, 2017 | Go to article overview

Industries Can Start Counting Their Benefits from Tax Law Craft Breweries, Retailers and Those in Corporate Finance among Winners


Wiseman, Paul, The Spokesman-Review (Spokane, WA)


WASHINGTON - Craft breweries are raising a glass to the Republicans' new tax overhaul: It cuts the excise tax on beer. Retailers, long saddled with heavy tax bills, will get relief. So will some high-profile names in corporate finance, led by Wells Fargo.

The tax measure that President Donald Trump signed into law Friday distributes benefits across a range of American industries, from construction to health care.

"As a general rule of thumb, everybody's doing well under this bill," Martin Sullivan, chief economist at Tax Analysts, says of U.S. companies. "When you give out a trillion in tax breaks, it's hard to create a lot of losers."

No wonder the stock market has been roaring in anticipation of fatter after-tax corporate profits. The new law slashes the corporate tax rate to 21 percent from 35 percent. It applies a low one-time tax to the profits that corporations have long kept overseas to avoid paying taxes under the current higher rate.

It also delivers a windfall to people who pay personal taxes on business earnings. It lets companies immediately write off the full cost of new equipment. And it showers goodies on some individual industries, such as craft brewers, distilleries and wineries.

The reasoning behind shrinking the tax burdens of corporations is to free up money for companies to invest in buildings, equipment and people and thereby juice the economy - and, in turn, benefit workers. Yet mainstream economists have expressed mainly doubts that workers will benefit much from corporations' lower tax burdens.

In dollars, the biggest tax savings from 2018 through 2027 go to manufacturers: $261.5 billion, according to an analysis by the University of Pennsylvania's Penn Wharton Budget Model. Next-most-fortunate are insurance and finance companies ($249.4 billion) and retailers ($171.4 billion).

Supporters of the Republican tax bill point out that America's 35 percent corporate tax is one of the highest among advanced economies. But the tax code is so riddled with loopholes that few corporations have actually paid that list price. Without the new law, the effective tax rate across all industries would have been 21.2 percent next year. With it, the effective rate across industries drops all the way to 9.2 percent in 2018, according to the Penn Wharton Model.

Not all industries have gained equally from loopholes. Retailers, for example, would have paid a 27.5 percent rate in 2018; under the new law, they'll pay just 15. …

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