If you had asked me at the end of October whether the president would sign a comprehensive tax reform bill just before Christmas, I would have wagered that the hapless Denver Broncos would have a better chance of landing a spot in the playoffs.
Well, Trump signed the biggest changes in the tax code since 1986. And he did it three days before Xmas. GOP 1, Me 0.
Michael Kitces writes, “The legislation will result in substantive tax reform for corporations, with the elimination of the (corporate) AMT and consolidation down to a single 21% tax rate, all of which are permanent.
“However, for individuals, the new legislation is more of a series of cuts and tweaks, which arguably introduce more tax planning complexity for many, and will be subject to a(nother) infamous sunset provision after the year 2025. Michael Kitces writes.”
I agree.
From an economic perspective, the GOP is hoping to unleash the economic animal spirits that have been lurking below the surface for much of the expansion.
Will it work? Economists are divided.
Nearly 90% of economists believe the cuts will fuel a modest surge in growth over the next couple of years, according to a WSJ survey. But opinions are divided after that.
If reform simply spikes the punch bowl for two years, it will likely be deemed a failure. But if lowering the corporate rate and providing big incentives to buy capital equipment boost the supply side/the productive side of the economy, it will yield tremendous benefits.
One thing’s for sure, the U.S. no longer has the third-highest corporate tax rate among 188 nations. It now has a business tax code that is more likely to attract foreign investment and job-creating capital.
Simply leveling the playing field (or in several cases, tilting it toward the U.S.), reducing the punitive nature of the tax bite, and dragging an arcane system into the 21st century has to be beneficial… at least on some level.