Carlo Barbieri

Carlo Barbieri

Published on “The Boca Raton Tribune” – On 12/21/2017 By Carlo Barbieri

The champagne corks were popping on Capitol Hill and at the White House this past week. The major tax code reform bill President Donald Trump has promised since he was a presidential hopeful in 2016 was adopted by Congress on a razor-thin vote of 51-48.  Only Sen. John McCain (R-Arizona) was absent because he’s being treated for brain cancer.  But he had already expressed his approval.

We have long praised Trump for his business-style approach to running the government, a method that has led to major increases in the stock market, lots of new jobs, the first 3%-plus increase in GDP since before President Barack Obama took office and a feeling of optimism that has spread from the business and industrial sectors to households around the nation.

As with any major piece of legislation, all is not rosy.  Not a single Democrat voted for the bill, meaning whatever happens with tax reform measure in the years ahead will get nothing but disdain from the other side of the aisle. But there are major benefits in the bill, measures that House Minority Leader Nancy Pelosi is apparently blind to in her assessment that Republicans will “rue the day” they pushed forward on the reform package.

What does all this mean? After extensive analysis of stories posted on the Internet, it appears economists feel the bill will provide a boost to the US economy in the short-term. But the size and length of that boost remain questionable.

The Joint Committee on Taxation said the bill will push growth in the GDP by 0.8 percentage points during the first 10 years of the bill’s tenure.

Goldman Sachs estimates GDP growth at 0.3 percentage points above baseline in 2018 and 2019. Analysts for the Penn-Wharton Budget Model said the annual hike would be between 0.06 points and 0.12 points.

These numbers apparently don’t include GDP growth that has already happened – increases that far exceed anything registered during the eight years of the Obama administration.

As stated by President Trump at a White House news conference: “We’re going to see something that’s going to be very special. We’re bringing the entrepreneur back into this country. We’re getting rid of all the knots and all the ties. And ultimately, what does it mean? It means jobs, jobs, jobs, jobs.”

Let’s look at the impacts in summary. This is what will happen in the business community:

Impacts on the wealthy:

For the middle class:

For those who itemize instead of taking the standard deduction:

Most American taxpayers will see a tax cut as a result of the bill. How much of a cut depends on a variety of factors. Overall, the Tax Policy Center estimated that the average American will get a tax cut of $1,610 in 2018. The center also says every income bracket will get a tax cut. People in the middle quintile of earners would get a cut of $930 on average in 2018 and $910 by 2025. Overall, about 80% of people would see a tax cut in year one of the legislation

But different income groups will see different benefits — and some none at all.

Tax reductions for individuals expire after 2025. Republicans argue that this predictable ending would be mitigated by Congress extending the individual decreases in the meantime.

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