Bacon's Rebellion

Democracy Thrives in Sunlight

The Tax Cuts Are Working

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by

James A. Bacon
in , ,

by Jack Hubbard

We’re barely three months into 2018 yet, and Virginia is already off to an incredible start.

The passage of the Republican tax plan in late 2017 has allowed Virginia’s more than 700,000 small businesses to breathe a sigh of financial relief.

Prior to the passage of the Tax Cuts and Jobs Act, the majority of small businesses (95%) were taxed at nearly 40% by the federal government. After state and local taxes were added in, that number often reached 50%. This astronomically high tax burden diverted valuable resources from job growth to government coffers. President Trump and Congress knew something had to be done.

Under the new tax code, small businesses whose income is less than $315,000 can now claim a 20% tax deduction, leaving more resources for investment and job creation. In Virginia, that increased deduction applies to nearly all of Virginia businesses. And these businesses now can take these tax savings, reinvest them, and expand their enterprises.

What happens when businesses expand? New hiring follows, putting more Virginians on the career ladder. And more Virginians working leads to greater investment in the Old Dominion.

Additionally, the tax plan’s lower tax rates and increased deductions have empowered businesses throughout the country to pass on tax savings and to their employees. So far, more than four million Americans have received a pay increase or bonus from their employer since the tax bill was passed. Larger companies such as Walmart, BB&T Bank, and Capital One have all increased starter wages.

Here in Virginia, the Bank of James in Lynchburg has raised starting wages to $15, added vacation days, and increased its charitable giving plans.

The list of beneficiaries of the tax bill continues to grow. Even many public utilities have announced that they will be cutting rates on their customers. Residents in nearby Washington, D.C., will see their electric rates cut after Pepco announced lower rates during the first quarter of 2018, and I can only hope that Virginia companies follow suit. These cuts are occurring only because President Trump and Congress did their jobs, and people are seeing real  money in their pockets.

Media reports notwithstanding, the Tax Cuts and Jobs Act has proven itself time and again in only one month since its passage.

While Democrats may call tax savings “crumbs,” the real-world benefits of tax cuts suggest otherwise. Job creators—and the people they serve—are more optimistic than ever. Imagine what the rest of 2018 will have to offer.

Jack Hubbard owns the The HomeMade Gin Kit in Alexandria.

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9 responses to “The Tax Cuts Are Working”

  1. Steve Haner Avatar
    Steve Haner

    I thought you needed a bathtub to make gin….:) That’s what my grandpappy told me (I still have the earthenware jug he used when buying from his favorite bootlegger out in SW VA.)

    I wonder if Mr. Hubbard has any plans to export his product? Seriously, I am aghast that the tax cut – which I agree will have economic benefit (even better if spending is controlled) – may be followed by a trade war which will be a major counter weight to progress. The departure of Cohn is not good news.

  2. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    I used my tax cut to buy The HomeMade Gin Kit.

    Now I’m having trouble figuring out my taxes. And reading this blurry article is really really hard too so for the time being I have no opinion for now on tax cuts. But my opinion on the subject of Gin versus Vodka is undergoing a major renaissance and I expect soon to reach a moment of extreme clarity.

    And will report back then, hopefully, unless off the deep end.

  3. LarrytheG Avatar
    LarrytheG

    tax cuts are “ok” if you cut spending. There might be disagreements about whether taxes need to be provided for spending – such as the annual discussions most localities in Virginia have about setting a tax rate and whether the revenues will be sufficient for the schools and public safety.

    But what the localities can’t do that the GOP did do was cut taxes by borrowing money so essentially what we’ve done is borrow money to give tax cuts – and this is coming from the party that has vociferously argued against the deficit and debt – for as long as I can remember.

    It’s bad enough borrowing money to pay for capital projects but at least they are one time expenditures. borrowing money to pay for tax rebates is just plain dumb but the GOP has got their messaging down good enough to sell that idea to their base.

  4. TooManyTaxes Avatar
    TooManyTaxes

    Lots of places to cut federal spending and raise revenues. Make other nations in formal alliances with the United States, step up their military spending, pay the U.S. for stationing troops in their nations or cut back overseas deployments.

    Apply the Social Security income limit for taxation of benefits to all government benefit programs. Impose an expatriate tax on benefits paid to residents of other nations.

    Start a new Hoover Commission to look for ways to reduce the number of agencies, employees and contractors. Put to a vote of Congress on the same basis as the Base Closing process.

    Remove tax exempt status from any nonprofit that spends money on lobbying, in-house or outside consultants.

    Disqualify any contractor or subcontractor working on projects funded with federal dollars unless 100% of their work force is subjected to E-Verify. Restrict the business expense deduction to 50% of the amounts paid for wages and benefit for any employee or long-term contractor that has not been run through the E-Verify process and limit the deduction to 75% for any employee or long-term contractor who has been found ineligible to work in the United States.

    Abolish public broadcasting. It made sense in the days of three networks. These are just ideas that popped to mind.

  5. LarrytheG Avatar
    LarrytheG

    I’d start with Medicare which charges $134 a month. It ought to be $500 a month or more… and if it was – that would cut 600 billion from the budget.

    Next – I’d set flood insurance premiums at 100% actuarial levels.

    Then I’d get rid of tax-free money for health insurance and everyone would have to pay taxes on that money.

    Next I’d get rid of ANY deduction of ANY kind for houses other than the primary one for the taxpayer and then only allow the median home price as the deductible.

    I’d stop subsidizing the federal gas tax and set it at whatever level it needed to be to pay for transportation projects and/or convert more roads to toll roads to fully pay instead of taxing people sales tax to pay for highways.

    I’d get rid of carried interest and stepped-up basis for inherited property.

    I’ve got more… but basically everyone should pay their fair share and not get tax breaks .. just like we do State and Local taxes – no tax breaks.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Where do you stand on my suggestions for curbing the deductibility of wages paid to workers not authorize to work in the United States?
      I like your proposal on flood insurance.

  6. LarrytheG Avatar
    LarrytheG

    I’m 100% in favor of strict enforcement of E-verify and would support hefty fines and even jail time for violators but the deduct-ability issue I’m not sure is a true budget issue as much as it is a sanction against illegal acts ..and not sure how much money it actually would save the budget.

    In general – I separate pure budget issues from other policy issues.

    For instance, policies to prevent illegals from getting benefits -is a policy issue first then a budget issue second… but I suspect on an impact to the budget – it’s not in the top 10 and maybe way down the list… so not really a high priority budget issue.

    In general – if we raised the fees for Medicare, got rid of the employer-provided tax subsidy for health insurance – we’d balance the budget right now. But again , I’d do that in a non-punitive manner – i.e. not go use it as a weapon against illegal behavior… deal with that separately as a policy issue regardless of the money part.

    On the E-verify , separate from the budget part – I’d like to see us focus on a guest-worker program similar to Canada where they allow and encourage guest workers but severely punish employers who hire full time illegals. We have the ability to do that but our problem is the GOP is split into two factions – one wants the cheap labor and the other demonizes illegals and the two of them cannot reconcile – entirely separate from the Dems. In other words if the GOP were totally in charge – they still can’t fix immigration so they instead continue to distract with this demonization of illegals which is popular with their base but totally evades actually doing what needs to be done.

    1. TooManyTaxes Avatar
      TooManyTaxes

      By bringing in compensation for unauthorized workers into the federal Tax Code, I think the federal government could need fewer immigration raids on employers. Rather, the IRS, working in conjunction with ICE, would check the tax returns of employers in industries with high use of unauthorized workers for a match-up between employee and E-Verify use. Employers without evidence of compliance, which also failed to demonstrate it took only reduced deductions for employee compensation paid to affected workers, would quickly have significant federal tax problems–something that tends to get the attention of businesses quickly. For some businesses, they would quickly fall into the tax fraud category. I strongly suspect that, after a few years of aggressive enforcement, businesses would soon move to hiring only authorized workers.

      I’m not totally opposed to a guest worker program provided that it is fair to all parties, employers, guest workers and American workers. I think employers should be required to demonstrate that they tried to hire American workers (both citizens and green card holders) at higher wages and were unsuccessful before being permitted to bring in guest workers. If a business could not demonstrate compliance, it should be subject to whistle blower lawsuits.

      Once admitted to the U.S. for work, the guest worker should have full protection from all labor laws. A guest worker authorization should not be used as a stepping stone to legal immigration. A person desiring that result should be required to apply for a green card separately from the guest worker process.

  7. LarrytheG Avatar
    LarrytheG

    We need labor. I’m not convinced that we have too much immigration and it is eating our jobs…

    I’m opposed to demonizing those who come here – even the illegals – if we ourselves will not pass the laws that prevent employers from hiring illegals – for cheaper labor and to essentially use them in a way – like slave labor because they have no protections..against bad treatment…

    I agree on the distinction between guest worker – and aspiring immigrant.

    But the dirty little secret is that there are quite a few jobs that most Americans will not do – if you don’t think that – pay a visit to a nursing home… or hard labor like asphalting roads or roofs… hotel and motel cleaning services, etc… These are jobs that are not suitable for quest worker … guest worker is for seasonal employment.

    We have to get off this kick of making immigrants enemies of us.

    The whole country is immigrants if you go back a few generations.

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