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".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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".
