Trump’s Tax Plan All Comes Down to This Week
The markets continue to trend higher daily as perhaps the most significant cataylst of 2017 looms. Of course, we’re referring to President Trump’s tax plan and proposed tax cuts.
Larry Fink, chairman and chief executive officer at BlackRock Financial Management Inc., spoke to Bloomberg in early October about the tax cut plan. Fink’s main concern is that the plan would add to the U.S. deficit.
“It only works if we can successfully bring our economy up from this 2-2.5% range to 3-3.5%. We have to grow out of it.”
The U.S. Commerce Department has reported GDP growth of 3% or higher in each of the past two quarters.
Trump stated at the end of August,
“We just announced that we hit 3% in GDP, it just came out.”
“On a yearly basis, as you know, the last administration, during an eight year period, never hit 3%. So we’re really on our way. If we achieve sustained 3% growth, that means 12 million new jobs and $10 trillion of new economic activity over the next decade. That’s some numbers.”
Trump’s Tax Cuts | Top 5 Facts
The Motley Fool, put out an article earlier this month highlighting 10 Key Facts About the Republican Tax Plan. Below are the Top 5.
“1. The corporate tax rate would drop to 20%
The Tax Cuts and Jobs Act includes a permanent corporate tax rate of 20%, down from the current rate of 35%.”
“2. Four individual tax brackets
The tax framework released by Republicans in September called for three tax brackets with rates of 12%, 25%, and 35%, down from the current seven-bracket structure.”
“3. Standard deductions are up, personal exemptions are out
The GOP tax framework called for a near-doubling of the standard deduction to $24,000 per married couple and $12,000 for individual taxpayers. However, the personal exemption would be eliminated, which could result in a lower overall deduction and possible tax increase for families, especially those with several children.”
“4. Child tax benefits would improve
For families, greater tax breaks for parents may offset the loss of personal exemptions. The Tax Cuts and Jobs Act calls for raising the Child Tax Credit from $1,000 to $1,600 and also adds a $300 credit for Americans with non-child dependents.”
“5. The estate tax will be phased out
The Tax Cuts and Jobs Act calls for doubling the exemption amount for the estate tax from $5.6 million (the 2018 threshold) to $11.2 million and will eliminate it completely after six years. Republicans have been trying to get rid of what they call the “death tax” for a long time. Now it appears they may finally get their way.”
Senate Tax Bill Update
The Senate tax bill is heading to a floor vote as early as Thursday. According to Bloomberg,
“Should it pass, Republican leaders will have to hammer out a compromise between different provisions in the House and Senate bills.”
Investors are watching this vote closely. If passed, the markets will surely rejoice. Consumer sentiment is at its highest level since 2004 and business sentiment exploded to 1980 levels following Trump’s election. Finally, for TSX Venture investors and all global investors betting on new all-time highs in 2018, the tax cuts need to be approved.