Trump's Tax Bill - Mostly Positive For Truckers

In the early hours of Saturday Dec 2nd morning after days of negotiations the GOP Senators got 51 votes and passed their version of the tax reform bill. All 48 Democratic senators voted against it. President Trump praised the bill by tweeting:

Biggest Tax Bill and Tax Cuts in history just passed in the Senate. Now these great Republicans will be going for final passage. Thank you to House and Senate Republicans for your hard work and commitment!

— Donald J. Trump (@realDonaldTrump) December 2, 2017

The bill as passed has significant differences with the GOP House version, which have to be reconciled before a final bill is sent to President Trump for signing.

While the details are still sketchy and anecdotal evidence that last minute amendments have been handwritten on pieces of paper, the first assessments on the bill’s effects are out.

How will the GOP Tax Cuts and Jobs act affect truckers?

The analysis shows that initially most truckers and owner operators will see a slight tax decrease. Over time most benefits of the tax bill will phase out unless Congress acts to make some of the changes permanent.

Here is what changes will affect the truckers most:

• The bill lowers the individual tax rate. There are differences between the House and the Senate version, but in general most individuals will get a lower individual income tax rate.

• The bill increases the standard deduction, eliminates the personal exemption, eliminates the deduction for state and local income taxes, increases the child tax credit. The sum of all these changes will be positive for the trucker in the in the next few years. As we mentioned above these changes phase out in time.

• Most changes affect business income. The bulk of the tax cut go to big multinational corporations and pass - through entities with high incomes who get a lot of Christmas presents from their wish lists. There is very little that will benefit truckers who are small business owners. There is a provision in the House version of the bill that creates a special 9 percent rate for business income from pass through entities that earn less than 75 thousand dollars. That would be great for owner operators who are mostly organized as pass through entities. The Senate bill will allow up to 23 per cent of the business income of a pass - through entity be deducted effectively lowering the tax rate. It is unclear what the final version of the bill will be.

• In a major provision that will benefit owner operators who own their trucks the bill will allow 100 per cent deduction of the purchase of new equipment such as trucks for 5 years. For example, a $150,000 truck can be expensed in 1 year leading to 0 tax liability and no taxes

• The Senate version repeals the Obamacare mandate for individuals to purchase health insurance. If it remains the law this while popular with healthy people, it will likely increase rates for everybody who remains on Obamacare. Most truckers and owner operators are self-employed business owner and subsidized health coverage is essential for them. Unless Congress acts to stabilize insurance markets in a meaningful way this is a major drawback of the bill.

Looking beyond the specific provisions of the bill, the major benefit for the truckers and the owner operators will be if the tax cuts indeed spur economic growth and investment, which in turn will lead to wage growth.  There is a major disagreement between the economists if the debt financed tax cuts will lead to economic growth.

In conclusion our preliminary assessment is that the Tax Cuts and Jobs act will be mostly positive for the truckers and the owner operators in the short run. The long-term benefits will be greatest if the forecasts for economic growth of upwards of 4 per cent turn out to be correct. If the bill does not lead to economic growth the long-term benefits for the truckers and the owner operators will be limited.