An article published by The Journal of Accountancy highlights the goals for tax reform that lawmakers announced on September 27. While this is not the specific legislative language, it provides a guide on what the tax-writing committees plan on reforming. Some of the major changes include condensing the individual tax brackets from seven to three with the new rates being 12%, 25%, and 35% which drops the highest bracket from 39.5% to 35%. Another change is to the corporate tax rate dropping it to 20% in attempt to bring businesses back into the United States which currently has the highest corporate tax rate in the world. There will also be an increase in standard deductions- $12,000 for individuals and $24,000 for married couples. These increases will again lower the taxable income and the amount of tax people will owe.
These reforms seem to benefit the people, but this will lower the government's tax revenue especially because their number one source of tax revenue is through individual income tax. This means in return the government will have to make budget cuts in order to stay out of a deficit. People may be happy with the reforms on the forefront, but if government programs they take interest in have budget cuts there may not be as much excitement for the reforms.
https://www.journalofaccountancy.com/news/2017/sep/republican-tax-reform-framework-201717551.html
Personally, the decrease in corporate tax will put people up in arms. Asking why should some of the biggest corporations in the world not pay more tax? Well, decreasing their tax rate could bring more corporations to the US. They could now be bases in the United States and help our economy. These corporations had the highest tax rate in the world, as you said. A corporation now has to pay less tax, which could allow the company to possibly hire more people. The cut in government revenue will certainly decrease their spending. This will force our government to be a bit more efficient, curious to see what this brings.
ReplyDeleteIf this tax cut happens corporations will be able to hire more workers hopefully creating many more jobs for U.S. citizens. People will also have more money in their pocket to spend allowing more money to be put into the economy through consumption which will help boost economic growth. Thus could be good allowing more people disposable income, but as you said this could mean the government creates an even bigger deficit for themselves if they are not careful with their spending. I feel this tax cut is a double edged sword and will need to be handled carefully if implemented.
ReplyDeleteIn the short term this may seem like a good plan and will keep the people of the United States happy for the most part. However, as you have mentioned, the government will have to cut spending significantly to prevent further increase to the budget deficit, which could cause unrest in society. I believe that income taxes should remain at current levels, while corporate taxes should decrease to promote more investment in labor and capital for firms domestically. This will help boost U.S GDP without costing the government too much money.
ReplyDeleteI think if the government actually does make budget cuts then this would promote growth for our GDP. More jobs will be available and more companies will come to the U.S. However, if the government does not than our economy will ultimately stagnate and rates will certainly increase as a result. because any benefit from the growth will be canceled out by the resulting debt of overspending by the government.
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