Bringing The World Home To You

© 2024 WUNC North Carolina Public Radio
120 Friday Center Dr
Chapel Hill, NC 27517
919.445.9150 | 800.962.9862
Play Live Radio
Next Up:
0:00 0:00
Available On Air Stations

Who Does The Tax Plan Really Benefit?


President Trump celebrated his first major legislative victory today - the giant tax bill now awaiting his signature.


PRESIDENT DONALD TRUMP: It's been an amazing experience. I have to tell you - hasn't been done in 34 years but actually really hasn't been done because we broke every record. It's the largest - I always say the most massive, but it's the largest tax cut in the history of our country.

SUAREZ: A political win for the president and a financial win for many U.S. businesses. Corporations will see their tax rate fall from 35 to 21 percent. Small businesses and privately held companies also will see their taxes cut. Of course some businesses make out better than others, and NPR's Jim Zarroli is here to break that down for us. Hi, Jim.


SUAREZ: Let's start with the big winners - multinational corporations. Other than the sharp drop in the tax rate we just mentioned, are there other things in this bill for them to like?

ZARROLI: Oh, yes. Big companies like Microsoft and Ford and Caterpillar that sell a lot of products overseas - they will have a lower tax rate, as you point out. But the bill also does something else. Right now the government charges U.S. companies taxes on profits they make overseas. So, like, if Apple sells an iPhone in France, it's supposed to pay taxes on the profits it makes to the U.S. government once it brings those profits back into the United States.

Now, in practice, what this has meant is a lot of companies just basically keep their profits overseas because they don't want to pay taxes. So the bill does basically two things. It creates this one-time-only, low tax rate for these companies to bring money back into the United States. And then second, in the future, they will no longer have to pay U.S. taxes on the money they make overseas.

SUAREZ: The president came to office promising to help companies that make things, manufacturers. Does this bill make good on his promise?

ZARROLI: Well, yes. Take one example. One thing the bill does is it changes the way companies can deduct large purchases of equipment. Right now if a factory buys a new piece of machinery, the company has to deduct that over a long period of time. But the new bill allows them to do that all upfront. I mean, you can take the deduction in a single year. So that will be really good for capital-intensive industries like, you know, auto makers and machine tool companies, companies that buy a lot of equipment. They will see their tax bills lowered.

SUAREZ: President Trump when he was still candidate Trump campaigned against something that's popular on Wall Street, what's called the carried interest loophole. What is it exactly, and is it now gone?

ZARROLI: It is not gone. Just to explain, if you get income from a hedge fund or a private equity fund, it's treated as capital gains, and it's taxed at a much lower rate than regular income. So the upshot is a hedge fund executive may - pays a lower rate than someone like a teacher or a postal worker. And this has been very controversial for a long time, and President Trump repeatedly talked about how unfair it was, promised to do something about it. Now the White House says it tried really hard to get rid of this, but it encountered too much opposition from Congress.

SUAREZ: The president has often said in the past few weeks that he and his rich friends will be hurt by this tax bill, that there's not really that much in it for them. The president made much of his fortune in real estate. Will real estate companies really be hurt by this bill?

ZARROLI: Oh, on the contrary. I mean, real estate does well. To give you just one example, the bill for the first time caps the amount of money that companies can deduct when they borrow. And this cap will hurt a lot of companies, but the cap does not apply to real estate firms. And real estate companies borrow a lot. You know, President Trump has called himself the king of debt. So he will benefit, and so will a lot of the big real estate investment firms that he partners with.

SUAREZ: NPR's Jim Zarroli in New York. Thanks, Jim.

ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.

Ray Suarez
More Stories