Some of its effects are already visible, and some of them will take months or even years to understand. Finally, economists are still publishing studies on the implications of the last comprehensive tax reform of 1986, signed by Ronald Reagan.
The following can not and can not say what the tax cuts by President Donald Trump are] has affected the economy so far.
. 1 Corporate taxes fell off the beaten track and fueled deeper deficits
A key feature of the Tax Cuts and Jobs Act was the reduction in corporate tax rates from 35% to 21%.
Although many companies never paid the full rate due to various exceptions, the decrease in corporate tax rates still provided a major incentive. They declined from a seasonally adjusted annual rate of $ 264 billion in the fourth quarter of 201
Corporate taxes make up only one This is a small part of the federal government's total tax revenue, and has fallen in relative terms to its economy since 1951, after World War II. However, corporate tax revenues are still rising when the economy is performing well. This is the first time that corporate taxes have suffered such damage when the economy is not in recession.
"In a sense, our economy is being hampered by public investment we are not making," said Steve Wamhoff. Director of Federal Tax Policy for the left-wing Institute for Taxation and Economic Policy. "Even if we think that infrastructure spending is a good thing, we can not do this spending politically because we have to tackle this deficit."
. 2 A short-term economic upturn is dwindling
Part of this came from an increase in business investment in R & D, new factories and equipment, possibly inspired by a provision allowing companies to spend capital expenditure immediately, rather than spending it incrementally over several years. Business Investments increased 8.4% from the fourth quarter of 2017 to the fourth quarter or 2018. This is a good sign because better factories, equipment and tools should increase productivity, resulting in some cases workers allows you to earn more money.
At the same time it is claimed that the effects will take years.
The investment hurdle of recent years has more to do with weak demand for goods than with a lack of capital, says Kyle Pomerleau, chief economist of the right-wing Tax Foundation.
"If you look at the US economy, it's not money shortage that keeps businesses from investing," Pomerleau said. "The whole question is whether this money can be used productively, are there any investments that will yield a sufficiently high return after tax to be worthwhile?"
In the meantime, the White House has been waging a trade war that has made raw materials such as wood and steel in the US more expensive and increased the cost of domestic production.
"You have two tax policies that work against each other". Pomerleau says.
. 3 Rich People Won More Than Poor People
Here's one way to look at it: as a result of corporate and personal income tax cuts, households earning between $ 500,000 and $ 1 million will increase their income after taxes by an average of 5.2%. Households earning less than $ 50,000 (average income in the US at $ 61,372) see only an increase of 0.6%.
This is partly due to a provision allowing taxpayers who earn money through pass-through companies to deduct 20% of that income. Pass-through companies include everything from architectural firms to part-time landlords registered as partnerships and limited liability companies.
"The people who benefit most, and the people who benefit the most from pass-throughs, are really rich people," said Jason Oh, a tax law professor at the University of California-Los Angeles.
The uneven distribution of the benefits of tax legislation now also calls for further changes to the balance.
. 4 Most Other Impacts: Either Too Soon To Say It Or Too Hard To See
The 2017 tax overhaul has delighted or upset a number of special interests, but it's still hard to know if their respective hopes are up or down Fears have come true.
Take the mortgage interest deduction limited to a total of $ 750,000 and weakened by doubling the standard deduction. The estate agents were worried that people would be prevented from buying houses – especially the most expensive ones.
However, the home ownership rate continued to recover from a low in 2016. And the real estate market is subject to many other factors – from mortgage rates to the price of concrete – that it is difficult to isolate the effects of A's tax requirements.
"Employment opportunities and demographic trends affect migration more than tax rates," the report said.
However, the effect will be uneven. Low-income filers will no longer benefit from the for-profit deduction, resulting in their favored grounds being lost.
"Larger institutions dependent on higher-income households may not feel the effects," said Una Osili, who wrote the Indiana University report. "But if you think about the causes that the everyday giver supports like church-based organizations, they will look more effective."
The Implications Not Seen
Most of the effects of the Tax Cuts and Jobs Act are not yet felt. However, an implication already works in the background. Tax cuts can help mitigate the effects of economic downturns, and there is much less scope for them now.
"The thing that concerns me more is that we are facing another recession," says Oh, from UCLA. "And what we've done with the Tax Cuts and Jobs Act is a set of tools we need to deal with the next recession, at a time when we have no recession."