Feb 7, 2019

The Trump tax cut surprise

Illustration: Sarah Grillo/Axios

Don't look now, but added complexities from the 2017 Trump tax cuts are driving a hiring boom for tax lawyers and accountants, along with a rash of issues where they shouldn't expect help.

Driving the news: "U.S. accounting firms crossed the one-million-employee threshold last year ... Job growth in the sector in the first year of the law was 3.6%," the WSJ's Richard Rubin notes.

  • "Deloitte Tax LLP grew by 10% this fiscal year and expects another 10% bump next year. KPMG LLP says it hired twice as many experienced employees in 2018 in its U.S. tax practice as it did the year before."
  • “[The Trump tax cuts] created just a whole lot of new complexity and it’s given us mountains of new guidance to figure out and to deal with," McDermott Will & Emery LLP partner David Noren told The Journal.

Between the lines: It's not exactly a surprise that a rewrite of the tax code would create new business for accountants, Axios' David Nather notes.

  • But the piece is a reminder that any tax code rewrite is going to make some tax laws more complex, not simpler — and someone always benefits from that.

Why it matters: The tax cuts simplified filing for many Americans — particularly by doubling the standard exemption — but have added a slew of issues on the corporate side.

  • International: "Multinational companies are subject to two new minimum taxes and complex rules for calculating a one-time tax on their past foreign profits. And Congress didn’t eliminate many of the old rules, instead layering new ones atop them."
  • Domestic: "Pass-through businesses such as partnerships can get a special 20% deduction, but they have to follow detailed regulations ... Businesses of all types face new restrictions on net operating losses and interest deductions and have new potential benefits from accelerated depreciation."

The bottom line: Don't expect Democrats to rush to help on the "technical corrections" Republicans have introduced to fix elements of the bill, especially after Republicans spent years rejecting Democratic efforts to clean up the Affordable Care Act.

Go deeper

SoftBank to cut its stake to get T-Mobile's Sprint deal done

Illustration: Rebecca Zisser/Axios

T-Mobile and Sprint announced a revised merger agreement that will see SoftBank getting a smaller share of the combined company, while most shareholders will receive the previously agreed upon exchange rate. The companies said they hope to get the deal as early as April 1.

Why it matters: The amended deal reflects the decline in Sprint's business, while leaving most shareholders' stake intact and removing another hurdle to the deal's closure.

Trump indulges Wall Street with Milken pardon

Photo Illustration: Sarah Grillo/Axios. Photo: Chris Graythen/Getty Images

Donald Trump loves Wall Street shenanigans. Companies owned by him have declared bankruptcy six different times, and he was once sued alongside Mike Milken for participating in a scheme to artificially inflate junk-bond prices.

Driving the news: Trump pardoned Milken this week, with an official statement positively gushing over Milken's role in developing the wilder side of fixed-income capital markets.