President Trump announced a massive overhaul of the US Tax code this week.
As reported at MarketWatch:
The Trump-GOP tax plan just announced has the potential to affect retirement savers in fundamental, long-term ways that could be positive for many Americans. The plan is a long way from reality and is likely to see some changes before becoming law.
For now, here’s the thumbnail version:
• Corporate taxes fall to 20% from the current 35% (and some business deductions end)
• A possible one-time lower rate on repatriated corporate income held abroad, perhaps at 10%
• A 25% rate on “pass-through businesses,” whose owners now pay higher, personal income rates
• Three tax brackets — 12%, 25% and 35% — rather than the current seven
• A near-doubling of the standard deduction, the first dollar of income taxed, to $12,000 per individual and $24,000 for married couples
There’s more, such as a possible refundable child tax credit and the repeal of the estate tax, but let’s focus on what happens to the retirement investor.
If you work and make enough money to save, chances are you save into a 401(k) plan at work or put money into a personal IRA. So far, so good.
If you’re smart, you then invest that money in stocks DJIA, -0.15% and, perhaps, bonds and other securities. After all, you want your cash to grow faster than inflation, and stocks are the way to get that long-term growth.
Now, about taxes. Some will grumble that the corporate rate is low enough, or that the effective taxes paid by companies is low already.
But consider what a corporate tax cut means for retirement savers with investments in the stock market. Sure, lower taxes might mean more jobs. But one thing it means without a doubt is higher corporate income — money that goes to the owners of U.S. corporations.
As great as President Trump’s tax plan is for working Americans, some on the Left are concerned that it will increase the US federal budget deficit. This is amazing since the Left never said a word about President Obama’s record setting US Debt increases.
Democrat and Republican Congresses had no problem increasing the US Debt under Obama at record setting levels.
In Obama’s first eight months after his inauguration, Obama increased the US debt by more that $1.1 trillion. This was the most in US history up to that time.
By the end of Obama’s first four year term he had increased the US Debt by more than $5.8 trillion. By the end of his eight years Obama had set the all time record of increasing the US Debt by more than $9.3 trillion.
Under President Trump the results are the opposite. President Trump set the record in his first few months for decreasing the US debt by the largest amount ($100 billion) for the longest period of time in US history (nearly six months). As of today after more than 8 months in office the US debt is up a little over $200 billion. This is a large number but it is only a small fraction of the Obama increases.
If President Trump continues this pace, he will have increased the US Debt by a little more than $1.1 trillion, or a little more that what Barack Obama increased the debt in his first eight months.
Overall it’s shocking to hear that the same people who either ignored Obama’s massive debt increases or approved them, now have concerns about Trump’s miniscule debt increases. They want Americans to believe that they are now concerned about debt increases and therefore Trump’s tax breaks to Americans and American companies should not take place.
What a bunch of frauds!