The GOP tax plan received a lot of attention and rightly so. It created significant changes for companies and completely overhauled existing tax law. It is expected that the new tax bill will produce some big winners and perhaps some losers. Let us look at who the expected winners will be and how the law will impact varying businesses.
The highlight of the new tax bill is undoubtedly the fact that corporate tax rates have been slashed from 35% to 21%. This is a significant drop of 14%. If you are a company making $100 million a year in corporate profits, then the new tax law will save you $14 million a year. Now that is not pennies or chump change isn’t it?
Given this fact, it is expected that the biggest beneficiaries of the new tax law will be companies that have been charged at the highest tax rate. Naturally, they will see the most significant reduction in the amount of taxes they pay on their profits. Whether they reinvest those tax savings back into the business, raise wages, give benefits, or pay shareholders is a whole different issue altogether. We have seen bonuses given out, and salaries increased for many employees though, which shows that the tax law has positively impacted certain sectors of the economy.
There is another component of the new tax law, that is often overlooked, but is very important, especially for large multinational corporations. The new tax bill lets multinational corporations such as Apple repatriate or bring back overseas profits at a one time significantly reduced rate. These companies can then use this overseas money to reinvest in the USA or just insert funds into the US economy. This can be a major deal and can further jump-start the economy.
As far as I can tell, for now, there is only one group of losers from new tax laws enacted by the GOP Congress and President Trump. State and local deductions will now be capped. This will result in some people in high tax states such as Illinois and California paying more money to the federal government than under previous tax statutes.