Trump’s tax reform. What will the population and business receive and what will the economy lose this year.

December 22, 2017, President of the United States Donald Trump signed a tax reform in the US, thereby fulfilling his key promise during the pre-election race. Trump’s Tax Reform. What will the population and business receive and what will the economy lose this year ?!

Trump’s Tax Reform. Basic goals.

At the end of November 2017, in his statement, the US President Donald Trump said that the tax reform will be aimed at combating offshore, as well as helping workers. According to him, the implementation of the tax reform will facilitate the return from offshore $ 4 trillion, as well as the creation of new jobs due to the return to the country of production capacity from abroad.

What taxes will be lowered?

Tax reform in the United States provides for a reduction in corporate income tax from 35% to 21%. The rate was also lowered for funds that are returned to the country from the activities of companies abroad from 35% to 15.5% for cash and up to 8% for non-cash funds. For individuals, a new tax payment graduation was introduced for seven groups on a scale: 10, 12, 22, 32, 35 and 37%. This scale of payment of taxes will act depending on the annual income. For example, a 10% tax will apply to persons who earn less than $ 9,525.00 a year, and the maximum rate of 37% will be paid by those whose earnings exceed $ 500,000 per year. Also, this reform abolishes the norm of compulsory health insurance, administered under Obama.

What results in the economy can cause tax reform

Trump himself predicts that this tax reform will accelerate economic growth in the US, increasing GDP growth from 2-3% to 4-6%, but other officials in the US give more modest forecasts. The return of production from abroad will positively affect the creation of new jobs in the States, thereby increasing the population’s expenses and accelerating the growth rate of the economy, but how fast this process can be is not yet known. Also, the implementation of the tax reform in the United States, according to the IMF, will accelerate the growth of the world economy to 3.9% in 2018-2019, although in October 2017 the IMF expected growth of 3.7%.

It is worth noting that the positive aspects of the tax reform in the US are ony in the future prospects and the question remains, what will happen to the US economy in the near future. The fact is that due to tax cuts, budget revenues will significantly decrease, it is understandable that the return of production and funds from offshore companies over time will block these losses, but I repeat once again that this process is not fast and to what extent it will be realized is not known. According to various estimates of experts, in the next 10 years due to tax cuts the deficit of the US federal budget will grow by about $ 1.5 trillion.

Conclusion

Drawing conclusions on this article, it can be noted that in the short term, the US dollar can continue its decline against the basket of currencies, as the US economy will undergo some transformation, so investors will prefer to invest in faster-growing markets in the near future while the growth of the US economy will not show the appropriate pace.

Alexander Sivtsov

Read one more article: “Trump’s Tax Reform: Prospects.“