The U.S. Tax Reform State of Play
Updated: May 18, 2020
The Tax Cuts and Jobs Act (TCJA) passed in December 2017 was laid down as a way to create more jobs, drive economic growth and level the playing field with companies based outside the United States. It slashed the corporate income tax rate to 21 percent from 35 percent.
This tax reform was also meant to help U.S. companies grow their earnings and become more competitive internationally. To that end, it introduced a one-time tax on profits held overseas for multinationals, and it allows them to transfer expenses from abroad to the U.S. to lower their profits. .
One of the U.S. companies that is benefiting the most from this tax reform is Apple. The tech company has so far returned nearly $25 billion per quarter to shareholders through stock buybacks and dividends this year versus about $11 billion per quarter last year, which is helping its stock price.
What we have seen so far in the U.S. economy is that, while the first-quarter investment numbers were more robust than they were in 2015 and 2016, they weren’t radically different from the roughly 5 percent rate of growth for business investment that prevailed since 2010.
Nevertheless, the first-quarter capital expenditures from 94 percent of S&P 500 companies totaled $159 billion, up more than 21 percent from a year ago and on track to be the highest year-over-year growth since the third quarter of 2011.
In terms of global investment flows, this tax reform has caused a major disruption with the United States bringing more money home than it sent out in the first quarter for the first time since 2005.
In fact, in New York and Florida we have seen an increase in foreign corporate investment. That is great news!
For our purposes, we are looking forward to providing all those new investors with business and corporate law advice to enter the U.S. markets.
Please contact us if you have any questions.
Dr. María Herrera Mellado Esq.
Kivaki Law Firm Partner
Corporate and Int'l Law Attorney