The Trump Tax Cuts of 2017 is an act that amends the Internal Revenue Code of 1986. The basic idea of the act is to reduce tax rates of businesses and individuals and to simplify personal tax. According to an Analysis by the Tax Foundation, it is expected that the act would lead to a higher dispensable income, and more employment. The report says:
“We estimate that the Act will boost investment, employment, and incomes in the United States, It will facilitate the expansion of U.S. capital stock, our productive capacity, and our ability to compete in the world.”
According to the report, the reduction of Corporate Tax to 21 percent will prove to be really beneficial in the long run and is expected to raise the GDP by 1.7%
The reduced income tax and tax rates on businesses would also yield a positive result in favor of the GDP. More than $5 trillion is the projected value of the capital stock. As the report further highlights the positive effects of this act, it states:
“The higher returns on capital will cause people to save more, to buy more American stocks and bonds, and to pump more money into their small businesses. The corporate and individual tax reductions on business income, and the faster depreciation permitted by expensing, will boost businesses’ saving directly by raising after-tax cash flow.”
One of the key things, promised by this bill is higher dispensable income. Experts suggest that this will lead to a rise in investments by the people and that the assets generated by the capital will make enough money to pay for themselves and their maintenance. This increase of investments into businesses will help create new jobs for the American people. As the report states:
“As the added capital is put in place, American wages and employment will rise, and the total amount of saving done by Americans will rise. As Americans add to their assets, some of the government bonds that foreigners may have initially bought may be refinanced by Americans.”
The report concludes with the following remarks:
“U.S. may repatriate cash held abroad. U.S. banks and mutual funds may lend more at home and less abroad. Foreign banks, mutual funds, and individuals may lend more or invest more in the United States and less at home. Foreign businesses may expand their U.S. subsidiaries.”
