The US Treasury Department collect US$91 billion less in 2018, the first full year in which President Trump’s Tax Cuts and Jobs Act (TCJA) took effect, than it did in 2017.

The TCJA, which was passed in December 2017, reduced the US corporate tax rate from 35% to 21%. However, research firm Oxford Economics reports that the ability of businesses to blend write-offs with a variety of tax credits allowed them to further lower their tax rate in 2018 to an “effective” rate of only 7% — the lowest since 1947.

In certain cases, corporations were able to use the new tax law to reduce the amount they paid last year to zero.

Data released by the US Internal Revenue Service (IRS) shows that the first year of the TCJA saw the Treasury Department collect about US$262.7 billion in income taxes before refunds in fiscal year 2018. The figure was 22% down on 2017, when the IRS collected US$338.5 billion and down slightly more on 2016, when the figure was US$345.6 billion.

The 2018 figures represent the lowest amount that US Treasury has collected from business since the depths of the post-crisis recession; in 2011 the IRS collected $242.8 billion from corporations’ income tax.

In addition to collecting less from corporations in 2018, Treasury also refunded them more than it had in previous years. Last year the IRS refunded businesses $60 billion, for a net total of $202.7 billion collected from corporations.

In 2017 the refund figure totalled roughly $45 billion for a net collection of $293.6 billion. Comparison of the net figures indicate that US corporations paid $91 billion less in 2018 than the previous year. Lower tax revenues added to deficits and pushed the US national debt above $22 trillion in February this year.

By comparison, when Barack Obama took office in 2009, US total debt was around $10.6 trillion and during his eight years in office it escalated to $19.9 trillion.

Special breaks and loopholes

“There are a lot of breaks and loopholes that allow a company not to pay,” commented Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy (ITEP).

“People, when they think of tax reform, think the government is going to fix the tax code and get rid of breaks and loopholes and get rid of tax dodging. What we got at the end of 2017 was not that. It was the opposite of that. The TCJA left a lot of special breaks and loopholes in place and created some new ones.”

Amazon reportedly avoided paying federal income tax on $11.2 billion of profits in 2018, while ITEP analysis identified 60 major US businesses that paid no tax last year, including Netflix, Delta Airlines and General Motors.

A report issued this week by the Congressional Research Service (CRS) – aka Congress’s think tank – claimed that the TCJA had little measurable effect on the overall US economy in 2018 and the tax cuts fell far short of paying for themselves by turbocharging the economy as President Trump promised.

The paper’s authors, Jane Gravelle and Donald Marples, found that lower effective corporate tax rates triggered a flood of stock buybacks and dividends for shareholders, but the US economy saw little benefit.