{"id":9721,"date":"2019-11-08T08:48:24","date_gmt":"2019-11-08T14:48:24","guid":{"rendered":"http:\/\/blog.uwsp.edu\/cps\/?p=9721"},"modified":"2019-12-17T12:58:29","modified_gmt":"2019-12-17T18:58:29","slug":"income-taxes-bush-vs-obama-vs-trump-part-5-corporate-incomes-briefly-but-importantly","status":"publish","type":"post","link":"https:\/\/blog.uwsp.edu\/cps\/2019\/11\/08\/income-taxes-bush-vs-obama-vs-trump-part-5-corporate-incomes-briefly-but-importantly\/","title":{"rendered":"Income Taxes – Bush vs. Obama vs. Trump Part 5: Corporate Incomes – Briefly but Importantly"},"content":{"rendered":"\n

The\nmost significant changes from the 2018 tax bill under President Trump impacted corporations.\nThe significant benefits to corporations included the following: a reduction in\nthe statutory corporate tax rate from 35% to 21%, 2) capital spending (spending\non property, plant, and equipment) could be immediately expensed rather than\ndepreciated, and 3) the taxation of repatriated foreign income (foreign income\nbrought back to the U.S.) was significantly lowered. In 2017, corporations were\ngenerally taxed at a 35% rate on foreign income, but only if they sent the\nincome back to the U.S.<\/p>\n\n\n\n

Here\nis what those changes mean. The statutory tax rate is the rate that corporations\npay on taxable income. Corporations also get deductions and credits, so\nnot all income is taxable income. However, the reduction from 35% to 21% puts\nthe rate at its lowest level since the 1930s and creates significant tax\nadvantages for corporations. Prior to 2018, there was a graduated corporate tax\nstructure that had a 35% top tax rate since 1993. That rate was significantly\nlowered due to the Tax Reform Act of 1986 passed under President Reagan, with\nthe rate lowered from 46% to 34%; the rate was increased to 35% under President\nClinton. Unlike the individual tax cuts, the corporate tax cut is permanent (no\nending date). The expensing of capital spending is another benefit. Rather than\ndepreciating (allocating) the cost of property, plant, and equipment over a\ncertain number of years as required previously, companies could expense (take a\nfull deduction for) the entire amount beginning in 2018. In other words, an\nimmediate tax benefit for the full amount spent. The expensing of capital\nspending is allowed through 2022. Finally, the reduced taxation on foreign\nincome is a major benefit for companies wishing to send foreign income back to\nthe U.S.<\/p>\n\n\n\n

Under\nboth President Bush and President Obama, the statutory corporate tax rate was\n35% and capital spending was depreciated rather than expensed. Lowering the\ncorporate tax rate from 35% to 28% (25% for manufacturers) and reducing the tax\nrate on repatriated foreign income was actually proposed by President Obama,\nbut those proposals both failed to get passed by Congress. Taxes on repatriated\nforeign income were significantly but only temporarily reduced under President\nBush, in 2004. <\/p>\n\n\n\n

For a history of corporate tax rates, here is a spreadsheet history from the IRS: Historical Table 24 – Internal Revenue Service<\/a><\/p>\n\n\n\n

In\nsummary, the corporate tax changes were significant under the new tax law\nimplemented in 2018. The corporate tax rate was reduced from 35% to 21%,\nexpensing of capital spending allowed, and a significant reduction on the taxation\nof foreign income brought back to the U.S. Not all these ideas were new. Previously\nPresident Obama proposed (to a lesser degree) a reduction in the corporate tax\nrate and lowering taxes on repatriated foreign income; however, these proposals\nwere rejected by Congress.<\/p>\n\n\n\n

Taxes\n\u2013 everybody\u2019s favorite subject. Hopefully this blog provided some insight as to\nhow the system works, and what changed under Presidents Bush, Obama, and Trump.\nAnd yes, taxes are very important. Not only because they affect how much money\nyou get to keep, but the implications on government spending, how the\ngovernment funds that spending, and how the economy is affected, are\nsignificant. That\u2019s what we\u2019ll tackle in our next blog. <\/p>\n\n\n\n

CBEI Blog Series: Income Taxes \u2013 Bush vs. Obama vs. Trump<\/strong><\/em>
Part 1: Intro<\/a>
Part 2: Federal Individual Income Tax Overview, How it Works<\/a>
Part 3: President Obama vs. President Bush<\/a>
Part 4: President Trump vs. President Obama<\/a>
Part 5: Corporate Incomes \u2013 Briefly but Importantly<\/a><\/p><\/blockquote>\n\n\n\n

\"Kevin<\/figure>
\n

Kevin Bahr is a professor emeritus of finance and chief analyst of the Center for Business and Economic Insight<\/a> in the Sentry School of Business and Economics at the University of Wisconsin-Stevens Point. <\/p>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"

The most significant changes from the 2018 tax bill under President Trump impacted corporations. The significant benefits to corporations included the following: a reduction in the statutory corporate tax rate from 35% to 21%, 2) capital spending (spending on property, plant, and equipment) could be immediately expensed rather than depreciated, and 3) the taxation of […]<\/p>\n","protected":false},"author":136,"featured_media":9757,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[527],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/posts\/9721"}],"collection":[{"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/users\/136"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/comments?post=9721"}],"version-history":[{"count":3,"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/posts\/9721\/revisions"}],"predecessor-version":[{"id":9740,"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/posts\/9721\/revisions\/9740"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/media\/9757"}],"wp:attachment":[{"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/media?parent=9721"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/categories?post=9721"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.uwsp.edu\/cps\/wp-json\/wp\/v2\/tags?post=9721"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}