Tax reform starts with Trump's 2017 legislation (Ted Kaufman)

In April 2018, Sen. Kaufman authored a column describing the Tax Cuts and Jobs Act as “a deficit-exploding bust.” Quite right, as the FY 2019 federal deficit increased to nearly $1 trillion,” but “this column isn’t about that disaster.” Instead, the current column will provide “some specific examples of what loopholes were created in the bill.”

Tax reform is needed, according to the writer, and “among the first things on the agenda should be getting rid of just about everything in the 2017 Trump tax bill.” His evidence: (1) a luxury resort and apartment development called Marina Village, which is located in a designated opportunity zone located a few miles north of Mar a-Lago; (2) a Hudson Yards luxury store, office and apartment complex on the West Side of Manhattan, which raised at least $1.2B of financing (5% of total project cost) through an EB-5 investor visa program that “is supposed to be a way to jumpstart investment in remote rural areas, or distressed urban ones"; (3) FedEx supposedly reduced its effective tax rate from 34% in FY 2017 to “less than zero” in FY 2018; (4) Nearly 2 years after the tax law passed, “the windfall to corporations like FedEx is becoming clear,” as a NYT study failed to show a “statistically meaningful relationship between the size of the tax cut [they] received and the investments they made.” Oh, and “much of what corporations saved was used for stock buybacks whose main objective is to increase the bonuses of upper management.”

Re the examples: Only the Marina Village example seems apropos. The EB-5 investors program wasn’t created by the TCJA, but rather by preexisting immigration laws. The big reduction in FedEx’s tax liability was primarily due to a reduction in “deferred taxes” (which will affect the company’s reported income, but not its tax payments). To the extent that some companies have been buying back stock based on their assessment of investment opportunities, this increases the ability of investors to buy stock in other companies.

Granted that the TCJA will initially cut into tax revenues, soaring deficits also reflect across-the-board spending increases and the stealthy restoration of scores of special interest tax breaks in February 2018. Also the projected 10-year revenue loss of $1.5 trillion was before macroeconomic effects and will hopefully be reduced by faster economic growth.

Finally, it’s interesting that Sen. Kaufman acknowledges a need for tax reform without offering any ideas on the subject other than repealing some or all of the TCJA provisions.

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