The President of USA had signed the Tax cuts and Jobs act, and it is commonly known as the Trump Tax. The bill has wholly changed the US Tax structure for personal and well as corporate tax.
Everybody is talking about these taxes, but not all are aware of the implications. It is time to ask yourself and know about the details of these taxes so that you are ready for the repercussions in your life and America as a whole.
Details Of The Trump Tax And Its Implications In Life
The Act fact
As per the President and his coterie of loyalists it was necessary to overhaul the $1.5+ trillion tax structure so that the economy f the country which was in bad shape as before Mr. Trump came in could be restructured. It is ultimately the middle class who will feel the pinch in their pockets paying the taxes although the exemption limits have been increased, subject to conditions, the most benefited group will be the corporate and the high-income groups as they will be availing the permanent tax cuts as per the new act.
The Effects Of The Trump Tax On Individuals
The individual tax structure is retained as of before having the seven stages or tax brackets, and the top rate has come down by 2.6%, and it is now 37%. The 33% tax bracket has come down only by 1% to 32 %, 28% has got a massive cut of 4% and now stands at 24%. The 25% and the 15% tax bracket have been reduced by 3%. However, the lowest bracket of 10% and the 35% bracket remain unchanged. The new act will be valid for 10 years. Although the standard deductions have been increased to some extent, their value will erode with time due to inflation.
The Act And Obamacare
The Obamacare that used to impose a penalty on those who did not have the mandatory health insurance has been abolished with a 0% penalty, and fee will reduce the federal deficit, and the insurance premiums are expected to rise by 10% over a period of time burning a hole in the pockets of the individual.
Family And Child Tax Credit
There will be a temporary rise in family credits and deducts with the child tax credit rising to $2000 of which $1400 shall be refundable, and there will be $500 non-refundable credit for the non-child dependent. This credit can only be availed if the child security number is provided by the taxpayer while filling the returns and the child is below 17 years of age. It will also gradually phase out if the joint family income for the married couples exceeds 400,000.
The Trump Law also puts a cap on the state, and local taxes (SLAT) and these are going to benefit the high earners who will be able to itemize particularly in the Democratic-ruled states. The moving expenses have been scrapped, and they do not enjoy tax benefits anymore. The estate tax exemption limit has also been increased.
The Effects Of Trump Tax Of The Business Houses
They are the most benefited class in this tax reform. A single corporate tax has been created the rate of which is only 21%. It is going to repeal the minimum alternative corporate tax. At present, the top rate of corporate tax is 35%, and with this new law into force it will drastically come down. It is a boost for the businessmen and the corporate. It will allow the companies not to shift her base from a tax zone to a no tax zone and avoid paying taxes and this used to happen often with the merger with foreign companies were the tax rate was low. Supporters of this Trump Tax act argue that this will boost the American economy which is at present in a rather dark shape.
It also introduces the territorial tax system where only domestic earnings will be subject to tax. The treatment of intangible property held abroad has been altered, and it will mostly relate to intellectual property.
The territorial tax gain in envisaged in the law which state that only domestic earnings are subject to tax. The companies having a turnover of annual gross receipts of $500 million are subject to base erosion anti-abuse tax or the BEAT.
The Merits And Demerits Of Trump Tax
It is believed by many that this new Tax act will boost up the American economic growth to a much extent. It will be in the unified framework making the economy to grow at a faster rate. It is expected the new law will increase the revenues by $1.8 trillion within 10 years with the GDP rising almost by 3% by 8 years.
Again, it cannot be overruled that there would be shifting of cash from the foreign American subsidiaries through tax-free dividends and only paying 8% rate of tax over the remaining overseas assets.
It is said there is no reliable evidence with documentation that can say that the Trump Tax Act will work and it is only experimentation and may lead to new economic troubles for the country.
Although at one go it seems that the Trump Tax act will benefit all, if one has a more in-depth look, it will be seen that it is going to help mostly the corporate and the business section and the high-income groups. The middle and the lower income group might benefit instantly, but in the long run after the expiry of the projected 10 years that is the year 2025, they might have to shell out more. It is time that can only say the effects of the act and is too early to project how the American economy is going to shape up. It may so happen that Mr. Trump is not voted back and the new incumbent might scarp all the laws acts and bring in the new ones. The situation then will be very volatile and American economy will be like a volcano erupting in either side.