The Trump tax-cut stimulus still isn’t here

The economy is doing well, but 10 months after a steep Republican tax cut went into effect, there remains scant evidence the cuts are boosting business investment as Republicans promised.

The tax cuts, which passed Congress with no Democratic support last December, slashed the corporate tax rate from 35% to 21%, and also cut the tax burden for most individual payers. Yet the tax cuts remain unpopular, with slightly more people disapproving than approving. Research by Yahoo Finance and others shows that many Americans feel the tax cuts disproportionately benefited corporations and the wealthy, with less help for the middle class. That could hurt Republicans in the midterm elections on Nov. 6.

Trump and other Republicans argued that cutting corporate taxes would lead to a surge of investment that would ultimately benefit workers, as companies bought more stuff, built new facilities, hired more workers and raised pay. Yet the data so far for 2018 show no such surge. Here are some of the latest numbers:

Morgan Stanley’s capital-expenditure index, which tracks the change in business spending, fell 0.6 points in October. The index rose sharply in 2017 and peaked in mid-March. It’s still close to a record high. But it has fallen 6 of the past 7 months, which is the opposite of what you’d expect if there were a surge of business investment.

Business economists say the tax cuts have done little to change corporate plans for hiring or investing. The latest monthly survey conducted by the National Association of Business Economists included a question on whether the firm changed hiring or investment plans on account of the Trump tax cuts. Eighty-one percent of business economists said there was no change. Six percent said their firms had accelerated hiring, and 12% said investment was up, on account of the tax cuts. Three percent said they had delayed hiring, with 1% saying their firms had delayed investment.

RELATED: 5 states residents are fleeing to avoid tax rates

5 PHOTOS
5 states residents are fleeing to avoid tax rates
See Gallery
5 states residents are fleeing to avoid tax rates

#1: California
Moving to: Nevada

Nevada does not have a state income tax on individuals or business entities, while California tacks on a whopping 13.3 percent income tax rate to residents.

Place to live: Clear Creek Tahoe
Private residential community located on the eastern slope of the Carson Range in Western Nevada, set on 2,136 acres bordering 6 million acres of national forest. 

#2: Minnesota

Moving to: South Dakota

Minnesota's income tax rates range from 5.35 percent to 9.85 percent while South Dakota's does not have an income tax rate.

Place to live: Prairie Hills
Luxury community in Sioux Falls, South Dakota

#3: Oregon

Moving to: Washington

Oregon's income tax rate is 9.9 percent, Washington has no income tax.

Place to live: Aldarra Golf Club
Private, membership-only golf community east of Seattle.  

#4: Arkansas

Moving to: Texas

Arkansas has an income tax rate of 6.6 percent, Texas has no income tax.

Place to live: Avilla
Luxury living community in Plano, Texas.

#5: Georgia

Moving to: Florida

Georgia has an income tax rate of 6.6 percent, Florida has no income tax rate.

Place to live: Grand Haven
Golf community seated on a 4,000-acre nature preserve on the Intracoastal Waterway

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

Business spending was weak in the third-quarter GDP report released on Oct. 26. Nonresidential fixed investment, which measures business spending, rose just 0.8% from the second quarter to the third, which was the weakest number since the fourth quarter of 2016. The overall pattern looks like a slowdown. Nonresidential fixed investment rose by a robust 11.5% in the first quarter, followed by 8.7% growth in the second quarter, and 0.8% in the third.

White House economists acknowledge that it could take years for the tax cuts to fully work their way through the economy and trigger the kind of growth they’re aiming for. And Trump’s Council of Economic Advisers points to other data showing capital goods orders and other measures of business spending have spiked during Trump’s time in office. But even those numbers show a trend line in 2018 that’s similar to 2017, with no unusual spike—along with a tapering of activity in the last month or two. Here’s an example:

There are countervailing forces that might be offsetting the stimulative effect of the tax cuts. Interest rates have been rising—as they should, late in an economic expansion—which makes borrowing for investments more expensive. Business leaders have also been expressing increasing concern over Trump’s trade policies, including tariffs, which are raising costs and shutting off some foreign markets. Some are also concerned about an aging business-cycle expansion that might be in the late innings. Businesses are unlikely to invest if they think a recession is looming or policy mistakes might cut into economic growth.

The economy will still be strong when voters head to the polls on Nov. 6. But Republicans can’t credibly claim their tax cuts have caused a business boom. Maybe by the next election.

Confidential tip line: rickjnewman@yahoo.comClick here to get Rick’s stories by email

Read more:

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman

Sending Kids to College

TurboTax can help you take advantage of tax breaks to ease the financial burden of sending kids to college, including tax credits, tuition deductions, tax-free savings and more.

Read More

Brought to you by TurboTax.com

Summer Tax Tips

Smart tax planning happens all year round. Here are four things you can do this summer to improve your standing when tax time rolls around again.

Read More

Brought to you by TurboTax.com

Federal Tax Credit for Solar Energy

To encourage Americans to use solar power, the EPA and the Department of Energy offer tax credits for solar-powered systems.

Read More

Brought to you by TurboTax.com

Bigger, Better College Tax Credit

The American Opportunity tax credit, which replaced the Hope Scholarship credit in 2009, covers more years of college and offers bigger, better benefits to more taxpaying students or their families. Here's how the American Opportunity tax credit and Lifetime Learning credit, another helpful education tax credit, can help offset the rising cost of attending college.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.