THE TALON

Windfall from Tax Reform: Pay Raises, Bonuses, and Economic Investments

How the Act Affects You, and Everyone Else

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Windfall from Tax Reform: Pay Raises, Bonuses, and Economic Investments

President Donald Trump holds up the Tax Cuts and Job Act, after signing it into law.

President Donald Trump holds up the Tax Cuts and Job Act, after signing it into law.

President Donald Trump holds up the Tax Cuts and Job Act, after signing it into law.

President Donald Trump holds up the Tax Cuts and Job Act, after signing it into law.

Overall,  the Tax Cuts and Jobs Act cuts the corporate tax rate from 35% to 21%, cuts the top individuals tax rate to 37%, cuts income taxes, gets rid of personal exemptions, and doubles the standard deduction. While the corporate cuts are permanent, the individual cuts expire in 2025. The bill stays to the standard 7 income levels, but reduces the taxes for each level. These will change each year with inflation, as outlined with the bill. The bill also encourages taxpayers to take the standard deduction, as opposed to the mortgage interest deduction. This could lead to lower house prices, which couldn’t come at a better time, as economists are worried that the housing market could create a bubble leading to another economic collapse. The bill limits the deductions on mortgage interest to the first $750,000, while limiting deductions to $10,000. This could be harmful to higher tax states, specifically California and New York. The act also repeals the Obamacare tax on individuals who do not have health insurance. The act effectively creates 0.7% growth annually, helping offset some of the revenue lost from the tax deductions.

Following the announcement of the tax reform in late 2017, enthusiasts of the bill faced backlash from critics who targeted it, saying it wouldn’t deliver the results it promised, specifically for middle-class Americans. This is in part due to the failure to analyze the bill in its entirety, as many of the benefits for middle class and working class Americans are created indirectly through the corporate tax cuts.

Pay Raises

Following the signing of the bill, big companies such as Apple, Boeing, Comcast, Verizon, Walmart, Wells Fargo, and many more immediately offered employees $1,000 bonuses. Wells Fargo and many other companies raised their minimum wage to $15. Walmart, who had been criticized for its low pay, raised the minimum wage to $11. Starbucks will use its savings from the corporate tax reform to increase pay, give employees company stock, and expand their benefits (however according to NBC, this isn’t a big deal because Starbucks was already notorious for being good to its employees).

Economic Investments

Apple announced that it would be investing more $350 billion (that’s a hunk of cash, even for Apple) back into the American Economy over the next five years, creating more than 20,000 jobs and increased pay for employees, as well as creating a new headquarters in the United States. Wells Fargo says it will put more than $100 million towards boosting small businesses, and $75 million towards neighborhood revitalization efforts.

 

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