The new proposed tax bill could impact people in different ways. Looking at the tax reform from in totality, every income group will benefit from a tax cut. However, it seems that people in the highest tax bracket will receive the greatest tax cut. The top 1% of people would have a 7.5% greater income, after tax, with the new system. On the other hand, the bottom 80% of people would experience an increase between 0.8%-2.4% of income, after tax.
The Tax Foundation performed a "dynamic analysis" of the new tax bill. Meaning, they examined how the House's GOP tax bill would impact economic growth, by looking at how people's behaviors would be influenced. The analysis results were not totally decisive, but they showed the new tax reform could create economic growth, increased wages, and close to a million new jobs. Of course, all of that sounds great, but some economists do not believe this will happen. The Tax Foundation estimated the new tax reform could result in a 3.9% higher GDP over the next 10 years, compared to if the current tax system was kept in place. The GDP growth is great, but economists see how cutting taxes by such a significant amount, could add close to a trillion dollars to the deficit. Therefore, the economy's GDP would be experiencing growth, but the deficit would continue to increase.
Obviously, there are always going to be positives and negatives to big government changes, like tax reform. However, it is important to look at who will be impacted the most. Is it a problem that the top 1% would benefit the most? Should the bottom 80% of people be upset if the new tax bill is put in place? Will there actually be economic growth?
http://money.cnn.com/2017/11/05/news/economy/tax-reform-bill-house-republicans/index.html?iid=SF_LN
This is a tough situation. Obviously, the 3.9 percent increase in GDP would be very beneficial. However, the tax cut to allow for this growth seems to be the riskier option. This is due to the fact that if taxes are cut, the deficit will definitely increase and there is no guarantee of growth. On the other hand if taxes stay the same or are even increased, then the deficit could shrink or at least increase at a slower rate. This would be more of a safe option.
ReplyDeleteAgain, I don't think there is a tax reform that will ever benefit everybody. Unless they just cut taxes everywhere and take on tons debt. Now, we could increase our government programs and increase taxes like many other developed countries do. (Sweden/Denmark) If the main goal is economic growth, then its looking like we could get that from this tax reform. I expect to see many more changes before the tax bill is complete.
ReplyDeleteThe tax reform has good intent in helping out the bottom 80% and I think it is a step in the right direction. Hopefully it does not take a long time to get passed so we can get it into action; now is the time to make moves. Yes, the top 10% may benefit more than the lower 80%, however, it is important to look at the big picture. They should accept the potential tax break and look forward to the economic growth ahead.
ReplyDeleteI do think that the tax reform should help some of the people, especially in the in the bottom 80%. That being said, I do not think that any reform will make everybody happy. If we are looking to increase our economic growth, I think that this is a great route to go. I also think that there could be some negatives with this reform. This could lead to more government programs, which would not help our economy grow.
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