Tax reform: yes, it is a big deal sponsored by BUSINESS TIP Tax reform legislation raced through Congress at lightning speed. So quickly, in fact, analysts are still digesting its contents and assessing its impact. Critics say it favors the rich. Proponents promise it will unleash the American economy. Others worry about the long-term impact on the national debt. Yet, the truth is, nobody really knows for sure how this legisla- tion will reshape the economy or our society at large. From the perspective of corporate taxation, we can say for certain, passage of the Tax Cut and Jobs Act of 2017 is a big deal. For years, the United States has clung to an outdated 1986 era corporate tax code and a 1960s system of taxing “worldwide” income that most other countries abandoned long ago. At 35%, the U.S. corporate rate tow- ered over other developed coun- tries’ rates. In a global economy, where companies can choose where to produce and invest, these fea- tures pushed many companies and trillions of dollars overseas. Bold structural changes were needed. And, the new law does just that. Already, as of mid-January, over 220 companies have respond- ed, either by providing bonuses, wage increases, or both to employ- ees. AT&T gave $1,000 bonuses to 200,000 hourly employees and announced they will boost capital spending in the U.S. by $1 billion in 2018. Starbucks employees received wage increases and expanded ben- efits. Some dismiss these gestures as little more than window dressing with no real impact. Yet, others see this as an early indicator of positive things to come as the consequences of tax reform work their way through the economy. (Ed. Note: Conversely, since the reform has been enacted, we’ve seen major retailers close hun- dreds of store locations, and lay off thousands of workers. Whether coin- cidental timing or deliberate sched- uling, the effects on discretionary income are yet to be seen.) The new 21% corporate tax rate and the switch to a territorial sys- tem of corporate taxation are key changes. But these are not the only ones. Other changes include: 100% Expensing: The bill pro- vides a full and immediate write-off of most machinery and equipment By Pat O’Connor, Kent and O’Connor, Washington, D.C. 24 TileLetter | March 2018