A Win for Everyone…..

Whether you like it or not, President Trump has succeeded in passing the largest tax reform bill since the tax code was redone many years ago.   In case you are not satisfied with it, you are not looking at the bigger picture. You are also not focused on the fact that when the Democrats were in power there were multiple policies shoved down everyone’s throats that we all had to accept. So the people crying, complaining and protesting should call it quits and realize that The Trump administration is here to stay.

In any event if you look at the tax bill as we have at The Ribotsky Institute you will find that it is structured around offering direct benefits to all classes but to the middle-class specifically. There are multiple changes that focus on synergistic effects of multiple tax cuts and a more simplified tax code.   It is not just the specific cut or change, it is what it will mean in the long run for the taxpayer and the actual economy. (A point most seem to forget or disregard)

One of the first pieces of the reform is to lower business income tax rates.   It is no secret that the Trump administration is pro-business so what better way to assist everyone than to lower the small business income tax rate to twenty-five (25%).   This occurs while lowering the actual corporate tax rate to twenty percent (20%) from thirty-five (35%) currently. Which is the highest rate in the civilized world. It is also very important to point out that it is this very tax rate that has caused many multinational corporations that are United States based businesses to use offshore tax havens and other tax loopholes to shelter billions in corporate earnings. President Trump has focused his attention on repatriating those stockpiles of cash.   The changes being made to the tax rules have lowered that percentage as well.   Making it more advantageous for companies to bring the money back to the United States.   With that money back in the country, those companies can invest more into their businesses, merge, acquire or pay out dividends.

Changing the business tax rate translates to helping everyone not just the businesses.   Take into account that businesses are owned by taxpayers who help the economy, as the products or services they produce assist everyone in different levels of income.   Over time tax cuts will filter down to increased wages, greater employment numbers and better products or services being sold.   Several economic pundits have stated that a reduction to twenty (20%) in the corporate tax rate could lead to an increase in GDP numbers by more than two and one half percent (2 ½ %). That translates to approximately an additional $2 trillion or more in capital into the economy.   With that comes additional wage increases over the next five to ten years.   All of those things are positives for the American Worker, the American Tax Payer and the American Business Owner.

In addition, the reform offers more specific assistance to the middle class. More assistance than the Obama Administration ever actually bothered to structure. For example the change doubles the standard deduction and increases the child tax credit. It also states that it will add additional items to reduce the burden of higher education and ease the issues in regard to retirement.   One thing that is very important to our country’s economy is helping those in farming. The men and women who help feed us all have been burdened for years with the estate or death tax that made it difficult to pass a farm down to the next generation and preserve its value as an on going business. The elimination of this will allow farmers to be able to structure their lives for estate planning purposes in a way that makes economic sense for their economic future as well as buyers of their crops.   The farmer doesn’t have to worry about pricing their goods differently to compensate for future tax issues.

One of the biggest liberal misconceptions is that utilizing taxes for services is the only way for people to live. They follow along with this thinking that reducing taxes on the wealthy is a bad thing that will hurt the middle class.   What is extremely interesting is it actually has the opposite effect. Lower taxes on the wealthy means that there is more upward mobility and the wealthy will spend their income and stimulate the economy. Moreover, the wealthy are the ones that will invest in the market and in the venture capital or private equity world that stimulates growth and innovation.   There would be no Facebook, Microsoft, Apple, Uber or Tesla with that industry. So in the era of technology it is extremely important to stimulate that growth.

Add to that the fact that the tax code will be simplified by changing seven tax brackets into three or four. This will greatly reduce the amount of time that people spend on doing and filing their taxes. That is a money saver in and of itself as the guesswork of tax preparation will be somewhat reduced.

All in all no policy change is going to get the support of each and every taxpayer in the country. When looked at on a national scale and not just in today’s terms, this plan makes sense for all Americans.  Stimulating capital formation and reducing taxes over time will allow tax payers to save money and increase discretionary spending.   All of these facets will have real potential to stimulate the economy and bridge a new era of expansion.

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