Trump finally scores a big victory

Republican lawmakers have been putting the final touches to the most sweeping reform of the US tax system since the Reagan era.

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Donald Trump scored a hit with his tax reforms
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Republican lawmakers have been putting the final touches to the most sweeping reform of the US tax system since the Reagan era. The plans slash the corporate tax rate from 35% to 21% and will also simplify the tax code for individuals. The tax cuts will cost more than $1.4trn over ten years. The tax bill marks Donald Trump's first major legislative accomplishment following a string of failed initiatives since he entered the White House.

Sixty-six per cent of Americans think the measures will help the rich more than the middle class, and they are right, says The Washington Post's Greg Sargent. While most Americans will benefit from the initial wave of temporary tax cuts, "the plan gets increasingly regressive over time".

Republicans are trying to navigate the "awful politics" of the tax bill by saying that everybody will "benefit from the explosion of growth and wages that cutting taxes on corporations will supposedly produce". Yet "few economists believe that the latter will come to pass".

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Lowering corporate taxes may be unpopular with voters, says Justin Fox on Bloomberg View, but "tax experts in both parties agree that the current 35% rate is counterproductively high". When you add in state and local taxes "the US has the highest statutory corporate rate in the developed world, which gives corporations a big incentive to structure their operations in ways that avoid" the headline rates.

Trump hopes that the changes will encourage the likes of Apple and Microsoft to bring their huge piles of overseas cash back to the US, says Politico's Steven Overly. Yet sceptics suggest that firms are more likely to use their repatriated trillions "to bolster their stock prices and increase executive compensation, rather than add jobs".

Alex Rankine
Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.

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