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Earlier this year, Senator Tillis told WRAL, “If I could wave a wand and do everything we did in North Carolina up in D.C., we’d be even better off.” On one of his signature Raleigh achievements, he had his way, but North Carolinians are anything but better off.
In 2013, then-Speaker of the North Carolina House, Thom Tillis, passed sweeping tax legislation that benefited the highest income earners the most, preserving tax breaks for yachts, jets, and country clubs, while ending tax breaks for working North Carolinians, families saving for college, and teachers buying supplies for their classrooms.
Then, in 2017, Senator Tillis supported the GOP tax law that similarly cuts taxes for corporations and disproportionately benefits the top 1 percent, while raising taxes on over half of all North Carolina households.
Both efforts were pushed forward under the “false promise of trickle-down economics,” and the guise that tax cuts for corporations would somehow help put money back in the pockets of working families. But new reports over the weekend highlight both Senator Tillis’ failure to deliver economic relief for North Carolina families, both in the General Assembly and in the U.S. Senate:
The Raleigh News & Observer Editorial Board called the 2013 tax cuts jammed through the General Assembly by Speaker Tillis “a mistake that’s holding back North Carolina,” saying “state employees, teachers and state services have certainly felt the reduction in state revenue. But the boom that was supposed to come with making the state more ‘business-friendly’ hasn’t happened.”
The New York Times highlighted the trend recently employed by companies who’ve reaped the benefits of the Senator Tillis-backed GOP tax scam: instead of using their tax savings to reinvest in workers and equipment as the GOP promised, “companies have spent nearly three times as much on additional dividends and stock buybacks, which boost a company’s stock price and market value.”
Read more below.
News & Observer: The Verdict Is In ON NC’s Tax Cuts. They’re Not Working.
News & Observer Editorial Board — November 17, 2019
The verdict is in on President Trump’s 2017 corporate tax cut: It didn’t work.
The tax cut’s backers said reducing the corporate tax rate from 35 percent to 21 percent would increase the average household income by $4,000, raise economic growth above 3 percent and even pay for itself by generating more tax revenue.
As the Wall Street Journal’s Greg Ip noted in a recent column, “Nearly two years later, none of those things have happened, and there is scant sign that they will.”
This umpteenth example of the false promise of trickle-down economics raises anew questions about North Carolina’s aggressive cutting of corporate taxes.
The Republican-led General Assembly started phasing in tax cuts in 2013 that now cost about $3.6 billion a year in lost revenue.
Since 2013 it has been reduced from a high of 6.9 percent — then the highest in the Southeast — to 2.5 percent today. Among 44 states that have a corporate tax, North Carolina’s is the lowest.
State employees, teachers and state services have certainly felt the reduction in state revenue. But the boom that was supposed to come with making the state more “business-friendly” hasn’t happened.
In terms of gross domestic product (GDP) from the fourth quarter of 2013 through the second quarter of 2019… North Carolina lags behind three of its four neighboring states.
A targeted tax cut can help a struggling economy when the tax savings go to consumers who will spend it. But North Carolina’s across-the-board giveaway to corporations during a period of economic growth is not that kind of tax cut. It’s a mistake that’s holding back North Carolina.
New York Times: How FedEx Cut Its Tax Bill to $0
By Jim Tankersley, Peter Eavis and Ben Casselman
In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.
…President Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement.FedEx reaped big savings, bringing its effective tax rate from 34 percent in fiscal year 2017 to less than zero in fiscal year 2018, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed, as Mr. Smith said businesses like his would.
Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear.A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts.
FedEx’s financial filings show that the law has so far saved it at least $1.6 billion. Its financial filings show it owed no taxes in the 2018 fiscal year overall. Company officials said FedEx paid $2 billion in total federal income taxes over the past 10 years.
As for capital investments, the company spent less in the 2018 fiscal year than it had projected in December 2017, before the tax law passed. It spent even less in 2019. Much of its savings have gone to reward shareholders: FedEx spent more than $2 billion on stock buybacks and dividend increases in the 2019 fiscal year, up from $1.6 billion in 2018, and more than double the amount the company spent on buybacks and dividends in fiscal year 2017.
FedEx’s use of its tax savings is representative of corporate America. Companies have already saved upward of $100 billion more on their taxes than analysts predicted when the law was passed. Companies that make up the S&P 500 index had an average effective tax rate of 18.1 percent in 2018, down from 25.9 percent in 2016, according to an analysis of securities filings. More than 200 of those companies saw their effective tax rates fall by 10 points or more. Nearly three dozen, including FedEx, saw their tax rates fall to zero or reported that tax authorities owed them money.
From the first quarter of 2018, when the law fully took effect, companies have spent nearly three times as much on additional dividends and stock buybacks, which boost a company’s stock price and market value, than on increased investment.