The U.S. government has reportedly been losing revenue due to the approved tax cuts from the Trump administration. Due to lower tax rates, their payments to the federal government have significantly decreased in the last month, especially when compared to last year’s revenue.
The Treasury Department has recently stated that the government’s income dropped 7% in June 2018, in comparison with the numbers of June 2017, and decreased a substantial 33% in income from corporate taxes. The revenues were not the only aspect that changed in the federal government between both months, as the budget deficit decreased to about 15$ billion in this year’s June. The latter change was reportedly caused by accounting shifts and not actual spending changes.
When analyzing the situation from a broader scope, the federal deficit is expanding as the government’s spending becomes higher than its revenue. In June 2018, the budget gap found itself at a drastically higher place than it did a year before, increasing its value by 16%. Corporations, in general, have received a substantial decrease in tax rates, going from 35% to 21%. The fact that this year’s June had one less Thursday than last year’s also affected the situation since it decreased the number of withheld funds from employees’ paychecks.
Said distinction and difference in payments started showing and taking effect in February, where people ended up having more money to spend and less to give to the government. The situation has also been somewhat different for high-income business owners, who find themselves having to pay for their company’s taxes through personal tax returns. The partial exemption for these firms was done through a 20% deduction, which will only be applied to certain service businesses and those who don’t pay significant wages or have physical assets.
Business owners are still very confused in regards to whether or not they will be eligible for the exemption since the Treasury Department is yet to release an official list of criteria. Because of this, their financial advisers have strongly argued against rushing to conclusions and assuming that certain businesses’ tax payments for the year will be lower. They have also encouraged their clients to project tax payments that are between 5% to 10% higher than expected so that the owners don’t end up facing a payment that they were not prepared for. It is believed that the advantage from these cuts and exemptions will not be held until later this year or possibly early next year.
Featured image via Flickr/free pictures of money
