The politicians have been concerned about the rise in federal debt for a long time now. The debt is growing constantly every year and only few presidents including Bill Clinton and Calvin Coolidge had a budget surplus during their term.
The recent numbers show that the tax cuts along with the payout required for Medicaid and Social Security and the overall increase in defense expenditure have led to increase in the deficit. The tax paid by the corporations amounts to $204.7 billion in the fiscal year 2018 which is $90 billion less than the previous fiscal year.
Kimberly Clausing said that this difference reflects upon the tax bill provisions. He is a former member of the Council of Economic Advisers and also a professor at Reed College. The corporations are now charged one third taxes less than before.
The tax reform law dropped the corporate income tax rate from 35 percent to 21 percent.
Further, the companies have incentives under the tax law to bring back overseas earnings that would help to increase the investment in American jobs and domestic facilities.
A tax and accounting professor at the University of Pennsylvania Wharton School, Jennifer Blouin said,
If we get any growth in the corporate sector and they increase domestic investment, we should start to see that trickle upward.
However, the companies have another idea for investing that money towards buying back of stock or dividends which will ultimately benefit the shareholders. Another economist, Jared Bernstein said,
They’re lifting the more unequal side of the economy at the expense of the more equal or the wage share of the economy.
Several critics argue that the companies have sufficient resources for investing in the US facilities and projects. But since it doesn’t seem profitable to them, they wouldn’t choose to do so. Blouin says that the companies may not use the money productively.
Source: PBS News Hour, USA Today
