2021年3月23日 星期二

The incredible disappearing tax cut

Whatever happened to Donald Trump's signature achievement?
White House staff attaches the presidential seal marker to a podium ahead of Donald Trump's remarks during the six month celebration of the Tax Cuts and Jobs Act in June 2018.Tom Brenner/The New York Times
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By Paul Krugman

Opinion Columnist

I don't know about you, but I'm still in a state of mostly happy shock over the enactment of Joe Biden's American Rescue Plan. Obviously we won't be fully able to assess the plan's effects until some time has passed, but it's both huge and hugely ambitious; among other things, it's expected to cut child poverty roughly in half, essentially overnight. And yesterday I tweeted that Biden and his allies have achieved more in two months of unified control of Congress and the White House than Donald Trump and company achieved in two years.

But here's the thing: While Republicans failed to kill Obamacare, they did enact a big tax cut, with a headline price tag roughly the same as the American Rescue Plan. Yet these days you hardly ever hear people talking about the Tax Cut and Jobs Act, enacted in December 2017. Why did such a large bill, one that Mitch McConnell assured his colleagues would give them a big electoral advantage, more or less disappear from our political discourse?

Well, Democrats have had other fish to fry, although Biden is reportedly hoping to raise taxes on the rich, so the subject may make a comeback. As for Republicans, they have a problem. Their tax cut didn't deliver what it promised: a big surge in business investment. What it did deliver was a big windfall, not just to the wealthy, but to wealthy foreigners. Not something they want to highlight.

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The core of the Tax Cut and Jobs Act was a big slash in the tax rate on corporate profits. This was supposed to make investing in the United States much more attractive, drawing in money that would otherwise have been invested abroad. And as companies expanded their U.S. operations, they would need more workers, raising the demand for labor, and hence driving up wages. So the claim was that what looked on the surface like a big tax cut for wealthy stockholders was really going to go mainly to workers.

But the promised investment surge never arrived. It turned out that while U.S. corporations appeared, on paper, to have big investments overseas, many of those assets were basically fictitious: companies had been juggling the books to report big profits in low-tax jurisdictions like Ireland, which made it look as if they were investing a lot of capital there, but that didn't mean they were really building a lot of factories or buying a lot of equipment. So there wasn't actually a big hoard of capital ready to return if taxes were cut, and the big tax cut did basically nothing for business investment in America.

What that meant in turn was that what looked on the surface like a big tax cut for wealthy stockholders — who are, after all, the ultimate beneficiaries of after-tax corporate profits — was, in fact, a big tax cut for wealthy stockholders.

And there's another twist: Many of those wealthy stockholders weren't even American. A recent report from the nonpartisan Tax Policy Center estimates that 40 percent of the equities in U.S. corporations are foreign-owned, which means that to a first approximation foreigners received 40 percent of that corporate tax cut.

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At some level this arguably shouldn't matter; a tax break for oligarchs, princelings and sheiks sounds worse than one for domestic billionaires, but neither does much for ordinary families. But it doesn't sound great.

So Republicans stopped talking about their big tax cut. The only major legislation enacted under Donald Trump is rapidly fading from memory.

Programming note: My newsletter will be off next week while I travel. I'll see you in your inbox on April 6.

Quick Hits

Republican-leaning economists went embarrassingly all-out for Trump's tax cut.

Around 40 percent of global cross-border corporate investment is "phantom," fake assets created to avoid taxes.

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Leprechaun economics — accounting games to avoid corporate taxes — is distorting economic statistics. (I invented the phrase; luckily, the Irish have a sense of humor.)

I didn't even get into the "opportunity zone" scam.

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Facing the Music

Do you think you can tell heaven from hell?YouTube

Last week I wrote about how physical bookstores are where I find what I wasn't looking for. Small concert venues can do the same thing. I found this amazing pair of sisters via Rockwood Music Hall.

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On Tech: Big Tech wants points for jobs

Plus, don't share your location in photos.

Big Tech wants points for jobs

Timo Lenzen

Here's one more way that technology companies are becoming more like conventional corporations: When they talk about jobs, it's often a political message.

Google last week detailed its expansion of offices, computer data centers and staff around the United States. The company didn't say so, but it needs more people, buildings and infrastructure to keep growing and making money. It's smarter politics and public relations to rebrand it as "investing in America."

Google is not alone. Amazon has turned its mammoth work force into its loudest political message that the company is helping Americans and the economy. The iPhone manufacturer Foxconn keeps promising high-tech jobs at its Wisconsin factory, even though it hasn't delivered on three years of hiring promises. Facebook and Apple regularly talk about how they support small businesses and help generate jobs at app companies.

Growing corporations are engines of economic growth, and it's nothing new for them to brag about what they're doing for political reasons. Defense contractors might suggest to members of Congress that cutting the Pentagon's budget could lead to fewer jobs in a lawmaker's district or state. Walmart tallies how much it buys from American suppliers.

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But it's still odd to see tech companies playing this same game of corporate soft power. This was an industry that for a long time said it didn't need to do the usual corporate muck of lobbying and courting political power. This was never really true, but it's gotten even less so.

As more people and politicians worry about the influence of technology companies in the economy and our lives, digital corporations have been forced to try harder to keep people feeling warm and fuzzy about them. One way to do that is to copy what boring old companies have always done: Get attention for their hiring and growth.

Amazon is the epitome of a company that uses its hiring and economic growth as a tool to influence how others perceive it. My colleague Karen Weise has written about Amazon's using its growing staff of 1.3 million people as a force of political persuasion.

Workers at Amazon warehouses go to Washington to meet with members of Congress and give lawmakers safety vests with the names of the company's warehouses in their districts. Amazon regularly talks up its job openings and new warehouses and offices, and it has a website that tallies how much the company spends in the United States.

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It's a compelling message. Few companies in the history of the United States have hired people at the rate Amazon has recently. And many towns and states want Amazon facilities in their backyards — and politicians want credit for bringing those jobs to their area.

It's also undeniable that all that spending is for Amazon, not for America. The company's sales are growing fast, and its commitment to get more packages to Prime members' doorsteps in one day has required it to add workers, open more depots near major population centers and spend more on planes and trucks.

The desire to paint corporate necessity in the best possible light sometimes creates strange spectacles. Apple in 2018 basically patted itself on the back for paying taxes and buying equipment to make iPhones.

Tech companies are becoming just like every other for-profit corporation. They want to be seen as contributing to society, not just making money.

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TIP OF THE WEEK

Don't share your location in photos. Please.

This tip from Brian X. Chen, The New York Times's consumer technology columnist, made me immediately check my phone settings:

Many of us rely on our smartphones for our everyday cameras. But our phones collect lots of data about us, and camera software can automatically make a note of our location when we snap a photo. This is more often a potential safety risk than a benefit.

Let's start with the positives. When you allow your camera to tag your location, photo management apps like Apple's Photos and Google Photos can automatically sort pictures into albums based on location. That's helpful when you go on vacation and want to remember where you were when you took a snapshot.

But when you're not traveling, having your location tagged on photos is not great. Let's say you just connected with someone on a dating app and texted a photo of your dog. If you had the location feature turned on when you snapped the photo, that person could analyze the data to see where you live.

Just to be safe, make sure the photo location feature is off by default.

To do this on iPhones: Open the Settings app, select Privacy, then Location Services and finally, Camera. Under "Allow Location Access," choose "Never."

On Androids, inside the Camera app, tap the Settings icon that looks like a gear cog. Scroll to "tag locations" or "save location," and switch the toggle to the off position.

You might choose to turn the location feature on temporarily to document your vacation, but remember to turn it off when your trip is over.

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Before we go …

  • A very valuable chat app: My colleagues reported that Discord, a messaging app that is popular for group video games, has discussed selling the company to Microsoft. A sale may never happen, but the price that was discussed was more than $10 billion.
  • Meet Dr. Zoom: Some medical schools have held cadaver dissection by simulation software during the pandemic, and, yes, it's as weird as it sounds. My colleague Emma Goldberg talked to physicians in training about how they've adapted to virtual learning in what is typically very hands-on education.
  • Want to feel old and irrelevant?! Ryan Kaji is 9. His family generates $30 million in annual revenue from YouTube channels of Ryan opening new toys, exercising and doing craft projects. His family told Bloomberg News that the real money from those videos comes from sales of related merchandise like branded toys and clothes.

Hugs to this

It's officially spring here in the Northern Hemisphere. Chill out to this stunning video of robins. (This was recommended by The New York Times Cooking newsletter.)

Note: I made a mistake in Monday's newsletter. I said that e-commerce sales in the United States were about $800 million in 2020. The correct figure was $800 billion. Thank you to the On Tech readers who spotted this.

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