December’s tax reform is predicted to not have that much of an effect on the U.S. economy. Moody’s predict more companies will save money instead of spending on growth and that tax cuts for the wealthy will not trickle down.
Moody’s predicts that with new tax cuts, U.S. companies will use the extra earnings to pay down debt instead of putting it into the economy. Purchasing shares may also be a priority for firms.
Most individuals subject to the tax cut are those who earn $200,000 or more, which is about 5% of the U.S. population.
As the federal Reserve keeps pushing to normalize interest rates, wider deficits and higher borrowing needs are expected to soon follow.
Now that taxpayers have lost the SALT, or state and local tax deductions, many areas will struggle to pay for services. Many municipal and state budgets will tap into discretionary spending to cover costs for essential services.
Home prices will likely be hurt, too, as the lower cap on the mortgage-interest deduction reduces the tax incentive for home ownership at the higher end of the housing market.
Utility bills are slighted to be cheaper for consumers but place energy companies at a negative, which will be made up for with the tax cut credits by the U.S. government.
Companies such as Walmart, Starbucks and The Home Depot have also announced bonuses for employees thanks to new tax reform. However, the bonuses are one-time things in comparison to benefits of new tax cuts.
-Allen A Garzone II, Garzone Real Estate, Inc, Boston Real Estate Agent