By: Breanna Huynh
Effects of the tax cut, affecting the economy, businesses, and you.
On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act. Even though it is now 2019, many businesses and households in America are still affected.
This act cuts individual’s tax rate, doubles the standard deduction, eliminates personal exemptions and cuts corporate tax rates. Essentially it will double your taxable income, a downside for large families who will have to pay higher taxes.
Additionally, health insurance companies will lose money with the repeal of the Obamacare tax for those without health care insurance this year. The healthcare cost will rise, and fewer people will want to get preventative care, such as check ups, because of the increased price.
The Tax Act benefits people with a higher income though, those that make at least $100,000 per year. The Tax Foundation states that, ¨Those who earn more than 95% of the population would receive 2.2 percent increase in after tax income.”
On the other hand, Tax Policy Center responds, ¨Those in bottom 20 percent would only receive a 0.4 percent increase.”
Cutting taxes for the middle class has its benefits, with the likelihood that it will create more jobs than cutting taxes of people with higher incomes. For example, people in the middle class would want to spend every dollar they receive, motivating demand, unlike those who already have enough money.
Businesses are the ones that benefit most from the Tax Act. Unlike our tax cuts, which will expire in 2025, this will become permanent for businesses.
Some businesses, such as corporations, are taking advantage of this opportunity, such as corporations. In March 2018, they bought back much of their own stocks, spending a total of $305 billion.
Not only will this affect people and businesses, but the economy. As well, this will increase government debt to a deficit of one trillion dollars over the span of ten years.
U.S. income tax will progressively get worse as these tax cuts continue to occur, including the fact that the rates will be lowered for everyone, not excluding high income taxpayers. The one bright side is that this may create at least 339,000 jobs and add a percentage of 1.5 to wages.
According to the U.S. treasury, they assume that the tax cut will bring in 1.8 trillion dollars of new revenue. It would also increase sovereign debt, limiting economic growth and increasing the debt for future generations.
Guy Berkebile, the owner of Guy Chemical Company, responds, “I was paying nearly 50 percent of my income, my profits back to the government in the form of taxes and having more money in my pocket has enabled me to invest heavily.”
Now, there are 29 new jobs there out of the 160 employees. Berkebile expresses his opinion on how the new tax cuts benefits himself and other families, saying it keeps them more financially stable.
A middle class teacher and mother Tatum Tirado insists asks, “How do I provide for my family or feel confident I am climbing the ladder to live the middle class lifestyle when everything gets more expensive but my salary doesn’t go up.”
These concerns are what some middle class families feel about the tax cut. These two stories will be a huge factor in considering whether the taxes will be made permanent. As for now, some families and businesses benefit from this, but could eventually harm the economy in future years.