Lessons from the Trump Cut1st November 2018
It’s a bit less than a year since Congress passed the Trump tax cut, but we are far enough along that we can be fairly confident about its impact on the economy. There are three main lessons we can learn:
- The tax cut is to not leading the promised investment boom;
- The additional demand generated by the tax cut is spurring growth and reducing the unemployment rate;
- The Federal Reserve Board’s interest rate hikes are slowing the economy in a way that is unnecessary given current inflation risks.
The Investment Boom: Just Like Jared Kushner’s Hidden Genius, No One Can See It
Taking these in turn, it is pretty clear at this point that we will not see the investment boom promised by proponents of the tax cut. This point really has to be front and center in any discussion of the benefits of the tax cut. By far, the largest chunk of the tax cut was the reduction in the corporate tax rate from 35 percent to 21 percent, along with various other measures lowering corporate taxes.
The immediate impact of a corporate tax cut is to give more money to the richest people in the country since stock ownership is highly skewed towards the top 10 percent of the income distribution and especially the top one percent.
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