By Nancy Thorner & Ed Ingold -
It was on Friday, December 22, 2017, when President Donald Trump signed into law H.R. 1, known as the Tax Cuts and Jobs Act. H.R.1 makes widespread changes to the Internal Revenue Code. Almost all of its provisions, including a lower corporate tax rate of 21% and lower individual income tax rates, go into effect Jan. 1. See here to view H.R. 1.
The legislation was passed on fast track. Introduced in the House of Representatives on Nov. 2, 2017, it passed on Nov. 16, 2017. The version the House passed repealed the medical expense deduction, as well as many other individual tax deductions, and further reduced the number of individual income tax brackets from seven to four.
Reaction against the bill was immediate:
- On December 28, 2017: "The GOP tax scheme was a very merry corporate Christmas gift"
- On April, 10, 2018: "President Donald Trump's corporate tax cuts might not have trickled down to American workers in the way that he suggested they would. Instead they benefit rich corporations."
- On May 27, 2018: "Working families are, as usual, getting the short end of the stick from the new Trump-GOP tax law. Huge tax cuts that mostly go to the wealthy."
Democrats continue to claim that ordinary Americans aren’t seeing the benefit of Trump’s tax cuts in their paychecks. That is misleading on several counts. First, nearly half of all Americans have no Federal income tax liability. Secondly, deductions for high state and local taxes are now limited, which affects workers in blue “peoples’ paradise” states on the right and left coasts, especially the 8 states which hold 70% of the population. California and New York have voted to recover tax refunds to high income individuals and corporations with an exorbitant surcharge. The remaining 40 states are where the jobs are going, often via moving trucks.
The key word, however, is “paychecks.” About 3 million more people receive paychecks now than at the end of Obama’s tenure, of which 400,000 are high-paying manufacturing jobs. This more than offsets Obama’s net loss of 200,000 manufacturing jobs. By some estimates, each manufacturing job supports 10 non-manufacturing jobs.
These are not random variations, nor a continuation of Obama’s “success.” Rather these gains are a direct result of President Trump’s business-oriented policies, tax reform, and regulation-busting administration. We are at a point that there are more job openings than suitable candidates, even as more unemployed re-enter the job market. Infrastructure projects which once required an average of 19 years of permitting and review can now be started in as many weeks.
The dynamics of the economy dictates that wages will rise in response to productivity and competition, which in turn will drive inflation, which will lead to action by the Federal Reserve to reduce its effects. The Democrats will then rally under the banner of inflation and increased interest costs, having completely ignored the devastating effects of un- (and under) employment for the previous 8 years. Democrats point to the increase in gasoline prices. However consumption has risen now that more people drive to work and have money for travel. Mostly, though, oil prices were depressed by Saudi over production, which was designed to make our domestic production unprofitable.
We haven’t even begun the fight to establish fairness in international trade, but there is good news on the horizon.
President Trump achieved more than he expected in the surprising trade agreement struck with the President of the European Commission on Wednesday, July 25, 2018, a top White House official claimed as Jean-Claude Juncker pledged to work with the US to end China’s market abuse.
Mexico and the United States agreed on Thursday, July 26, 2018, to step up talks on updating the NAFTA trade deal in hopes of reaching an agreement on major issues by August, Mexican Economy Secretary Ildefonso Guajardo said.
As to a trade war with China, according to Robeco Chief Economist Leon Cornelissen, China has more to lose from a trade war than US and will hurt China more.
