Features

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.

876-Trump-634
Donald Trump scored a hit with his tax reforms

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".

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".

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Why Wall Street has got the US economy wrong again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
Inflation spiked in the US last month – is this the shape of things to come?
US Economy

Inflation spiked in the US last month – is this the shape of things to come?

Prices in the US rose much more dramatically than expected in July. Can we expect more of the same, and what does that mean for your money? John Stepe…
14 Aug 2020
If companies have too much power, we need more competition, not higher taxes
US Economy

If companies have too much power, we need more competition, not higher taxes

Free-market capitalism is breaking down and that is going to lead to higher taxes down the line. John Stepek explains why that matters for investors.
11 Aug 2020

Most Popular

No, the UK did not “plunge” into recession yesterday
UK Economy

No, the UK did not “plunge” into recession yesterday

That the economy took a massive hit due to Covid-19 should be news to no one, says John Stepek. The real question is what happens now.
13 Aug 2020
Inflation spiked in the US last month – is this the shape of things to come?
US Economy

Inflation spiked in the US last month – is this the shape of things to come?

Prices in the US rose much more dramatically than expected in July. Can we expect more of the same, and what does that mean for your money? John Stepe…
14 Aug 2020
The MoneyWeek Podcast: house prices, staycations, and the death of cash
House prices

The MoneyWeek Podcast: house prices, staycations, and the death of cash

John and Merryn talk about the rise in UK house prices and the fact that everybody is holidaying in the UK, plus gold's new highs, the death of cash, …
12 Aug 2020