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On the Last Day to File Taxes, Here’s How the Trump Tax Cut Unfolded
As the deadline for tax filing falls, the effects of the tax act are becoming clearer.
Peter Eavis and
It’s the last day to file your taxes (or ask for an extension), and the end of one of the most confusing tax-seasons in a long while.
While tax cuts are arguably one of the Trump administration’s biggest achievements to date, and businesses have been celebrating the profit windfall they received from a lowering of corporate rates, many Americans seem not to have noticed that individual taxes also fell.
Chalk that up to an early drop in the size of tax refunds for some, and the fact that, divided over a year’s worth of paychecks, the tax benefit may not have seemed consequential.
Now that the effects of the tax act are becoming clearer, here are some early conclusions about its impact on people and businesses:
Individuals Owed Less, but Did They Notice?
In the first few weeks of the tax season, the average refund processed by the Internal Revenue Service was significantly less than in the previous year — by as much as 17 percent.
That gap has since closed, however, and many who saw smaller refunds may have received the benefit of the tax cut throughout the year, in the form of bigger paychecks.
About 65 percent of taxpayers received a cut in their overall liability, according to estimates by the Tax Policy Center, and only about six percent paid more.
Business Did What Business Does
The tax bill slashed the corporate tax rate to 21 percent from 35 percent, but those numbers are a little misleading because few big companies ever actually paid the full tax rate. Instead, they found ways, like using overseas tax havens, of paying far less.
That was true again last year. In 2018, companies in the S&P 500 stock index paid even less than 21 percent. Their effective tax rate — based on the tax expense in their income statements — was 18.2 percent in the fourth quarter, according to data from S&P Global.
Some Trump administration officials had hoped that companies would use their tax savings to significantly increase their investments. That did happen. In 2018, companies in the S&P 500 index increased their spending on plants, equipment and other investments by 14 percent, a big improvement over previous years, according to data from Deutsche Bank.
But companies spent significantly more last year buying back their own stock, and that amount, $806 billion, was 55 percent higher than in 2017.
Peter Eavis is a New York based reporter covering companies and markets. Before coming to the Times in 2012, he worked at The Wall Street Journal. More about Peter Eavis
Keith Collins is a story editor on the Business desk, specializing in visual storytelling. More about Keith Collins
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