Blunt: Missourians seeing benefits of tax cuts

U.S. Sen. Roy Blunt said Tuesday that federal tax cuts passed by Congress are giving business owners and shareholders more money to spend and invest in Missouri's economy.

Lawmakers and business leaders from around the state spoke Tuesday at an event held by Associated Industries of Missouri, a trade group which represents business and manufacturers around the state, to speak about the benefits of the Tax Cuts and Jobs Act which passed Congress in December. Blunt stopped at the event on a statewide tour to hear about ways the bill is benefiting business owners around the state.

Blunt said bonuses given out by companies as a result of last year's legislation are increasing wages throughout the country.

"The day after the tax bill was signed into law we saw a lot of Missouri companies step forward with full-time and part-time bonuses," Blunt said. "A lot of companies in our state changed their lowest wage to a higher level."

Burgers' Smokehouse President Steven Burger said his business grew more last year than its total sales in 1985. Burgers' Smokehouse added a 40,000-square-foot production facility at its existing facility in California. Burger said the tax cut will help his business.

President Donald Trump signed the Tax Cuts and Jobs Act on Dec. 22, and it overhauled the nation's tax code. Corporate tax rates dropped from 35 percent to 21 percent under the new law. Individual tax rates generally fell by 3-4 percent and the seven personal income tax brackets were restructured. The standard deduction also doubled to $12,000 for individuals and $24,000 for married couples who file jointly.

Jason Hoffman, Jefferson City Public Schools chief financial officer, said the tax bill saved the district money as it issued bonds to build Capital City High School. Hoffman told Blunt the bill reduced the amount of tax-free interest on municipal bonds. Because JCPS received $120 million in orders for $45 million in bonds, Hoffman said the district reduced its interest rate on the bonds.

"We had a much lower rate than we were expecting, which is a benefit to the taxpayers," Hoffman said.

Blunt acknowledged a handful of glitches exist in the bill and he said he would like to try to fix those. Attendees at the meeting expressed concerns the tax bill eliminates deductions for meals and other business-related expenses. Blunt said he wants to address those issues, but opponents of the bill appear unwilling to re-visit the issue.

Since the bill's signing, three local banks announced plans to give their employees bonuses ranging from $500-$1,500 for full and part-time employees. Retailers in Jefferson City also announced plans to hand out bonuses.

Ray McCarty, Associated Industries of Missouri president, said it takes time for small businesses to build up a pool of money before they can issue bonuses or raises.

"A lot of your mid- and small-sized businesses are going to wait until they actually get the cut," McCarty said. "If they have a capital pool to pull from, they're probably not going to enjoy the benefit of that until they file their returns."

Analysts have said publicly it's likely too early to determine the true impact of the tax bill at this point. Jeremy Morris, a local certified public accountant with Williams-Keepers Certified Public Accountants & Consultants, told a group of business owners last week at the Jefferson City Area Chamber of Commerce that the bill eliminated many favorable deductions for business owners and some could see higher tax bills if their taxable income increases under the new law.

In January, a CNBC poll of S&P 100 companies found only 10 of 50 reached by the outlet planned to invest money saved from the tax cut in employee pay or facilities. TD Bank released results of a survey May 7 that said 48 percent of small-business owners think the Tax Cuts and Jobs Act will not benefit their businesses and 20 percent cited the tax bill as their top obstacle for the year. Just 15 percent of those who think the tax overhaul will benefit their business expect higher earnings, and 13 percent plan to purchase new equipment, according to the study.

When the dust settles, investors may be the biggest winners from the tax overhaul. S&P 500 companies already authorized $205 billion during buyback programs this year, a 48 percent increase from this time last year, according to Marketwatch. Goldman Sachs data cited by Marketwatch estimates companies will spend $605 billion on buyback programs this year, an increase of 23 percent from 2017.

Blunt said when companies buy shares back from investors that money goes somewhere. Often it goes to pension funds or individuals who can spend that money on other things, Blunt said. When companies bring money back from overseas, as the tax-bill makes it easier to do by charging them a one-time tax on those profits as they're repatriated, it benefits the whole economy, he said.

Among those who announced buyback programs was motorcycle manufacturer Harley-Davidson. In February, Harley announced a $696 million dividend increase and stock buyback plan weeks after it announced plans to close its Kansas City factory by the end of 2019.

Last week, Harley announced plans to build a factory near Bangkok, Thailand, to serve Asia-Pacific countries and avoid Thailand's 60 percent tariff on imported motorcycles. Harley also builds motorcycles at plants in India and Brazil.

The company told USA Today on May 11 the plant in Thailand has nothing to do with the plant in Kansas City. The company also maintained publicly that the dividend and buyback plan have nothing to do with the tax cut.

State Sen. Mike Kehoe, R-Jefferson City, told the News Tribune he thinks Harley is a one-off example that other companies will not follow.

"You're really getting an impression that industries here are expanding and taking advantage of the tax cut and looking at ways to improve their customer base," Kehoe said.

Ultimately Kehoe hopes the federal bill will give people more discretionary income.

"You don't know how much $100 per month is until you're short $100 per month," he said. "That's a big difference."

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