On Friday, Donald Trump was officially sworn in as our 45th President. He has said he will get right to work and “hit the ground running.” With all of his proposed policies, there are a few that could have a significant effect on our economy and on tax payers. Below are some of his proposals:
- Reduce number of tax brackets from seven to three
- Remove all loopholes from tax code
- Lower corporate tax rate to 15%
- Increase industrial spending to facilitate growth
- Impose a tariff on imported goods
With these listed, I would like to expand a little on how they will affect citizens.
Reducing the number of tax brackets and removing loopholes could help the economy because a lot of people will keep more of the money they earn. This could increase spending in the economy and therefore, improve it. The highest tax bracket is proposed to be 33% which will benefit those currently paying 39.6%.
Changing the corporate tax to 15% could be a good way of keeping companies in America and assist in bringing back companies who have headquarters overseas. A reduction in corporate taxes could also have a positive impact on prices.
Increased spending and an improvement in growth can spur the economy, but could have an adverse effect on some people. A strong economy gives the Federal Reserve (FED) a good signal as to when to increase interest rates, and how much. An increase in interest rates means an increase in the cost to borrow money. This could affect your ability to buy a home or a car, for example.
Imposing a tariff on imported goods could have a good or bad effect on you and the economy. We, as a country, import more goods than we export. A tariff is basically a tax on goods, which will increase the price on said goods. The flip side of that being, an increased price on foreign goods could encourage spending inside the United States.
These proposed policies will likely have an effect on all of us; whether good or bad will vary on each policy and on each individual. Keep a close eye on what gets proposed and what actually passes. Once something is passed, do a little research to see how it will affect you personally.
As always, talking to a professional may help you plan accordingly.