The Trump tax cuts had several publicly stated goals. First, by lowering corporate tax rates, they would induce companies to bring home massive stores of overseas cash. “We’ve got about $3 trillion in trapped cash overseas that basically can’t come back in this country because of our tax laws,” said Paul Ryan. Second, by eliminating loopholes and preferences, it would reduce the need for and value of gaming the tax code through specialized knowledge. “We just want to clean it up,” explained Ryan, “we just want to simplify the whole thing.” And third, by promoting new investment and economic activity, the tax cuts would spur enough new growth to replace the lost revenue.
Objective number three is already looking like a lost cause. Corporate tax revenues have plummeted, and the tax cuts are costing even more revenue than the government projected a year ago. A pair of new analyses today show that the other two goals aren’t looking very hot, either.
Economist Brad Setser writes that “there is no wide pattern of companies bringing back jobs or profits from abroad. The global distribution of corporations’ offshore profits — our best measure of their tax avoidance gymnastics — hasn’t budged from the prevailing trend.” American companies are still reporting their foreign earnings in the same handful of low-tax offshore locations.
What about the simplification? That hasn’t happened, either. Wall Street Journal tax reporter Richard Rubin reports that far from making accountants and tax lawyers unnecessary, they are more needed than ever before. The Trump tax cuts create new loopholes and complications that require even more tax experts to decipher and exploit. “Deloitte Tax LLP grew by 10% this fiscal year and expects another 10% bump next year,” he reports. “KPMG LLP says it hired twice as many experienced employees in 2018 in its U.S. tax practice as it did the year before.”
According to Rubin, the new joke among tax geeks is that the Tax Cuts and Jobs Act, as it’s officially titled, should be called the “Tax Jobs” and Cuts Act.
So the law’s putative goals have proven a failure. Tax revenues aren’t holding steady, corporate cash isn’t coming back from overseas, and the tax code is more complex and expensive to comply with than ever. So why aren’t Republicans thinking about repealing or at least revising the bill that has failed to accomplish its goals? Because it’s still doing a great job of accomplishing the actual goal that they really cared about: letting people who own businesses have more money: