Tax reforms include tax cuts for corporates and rich taxpayers, as well as temporarily reduced for individuals and families. Also, with the new measures, part of the Ombaker is abolished and it permits the drilling of oil in Alaska.
Medium-sized households will, on average, have a tax-deducted tax of $ 900 a year, while the richest one percent of Americans will be reduced to $ 51,000 a year.
Republicans believe that the new package of measures will strengthen the economy and economic growth, and the Democrats say the new measures will only deepen the gap between rich and poor Americans because the national debt of 20 trillion dollars will be increased in the next 10 years by 1.5 trillion.
Donald Trump said earlier that everyone will be on the winning side if a law on tax reforms is adopted. Is it actually like that?
Affect on EU business
Christine Forbes, a professor of global economics at the Massachusetts Institute of Technology, estimated that US overseas companies were holding assets worth about $ 2.5 billion, which are available for repatriation.
The Republican Tax Plan, which was adopted last month, envisages major incentives in the form of lower tax rates, for those companies that return part or all of the property back to their home country – the United States.
For now, a large part of this cash is being kept by European financial institutions, which would make the new US tax plan likely to affect banks in Europe.
Forbes also added that there is a suspicion that US companies will use cash to finance new investments.
The five largest economies of the European Union have warned the United States that a fundamental reform of the US tax system could be in contradiction with its international obligations and could have a negative impact on international trade. The US did not mind that, obviously.
Financial markets
Since the tax system is a very important factor in profitability of companies and has a big influence on the citizens’ property status, changes will certainly be reflected in the financial markets.
Simply put, the benefits from the new tax plan will be richer than the poor.
Namely, Trump wants to reduce the corporate tax rate from 35% to 21%, which will give companies and their owners more money. The tax rates on salaries are also reduced, and the average US family would pay $ 2,000 a year less than an average per year.
Tax incentives and assistance in paying health insurance will be significantly reduced, on the basis of which as many as 13 million Americans could cease to pay health insurance.
In total, over the next 10 years, state budget revenues could be reduced by $ 1,500 billion due to changes.
When it comes to the US dollar, the voting tax reform should lead to greater interest in the purchase of this currency.
One of the measures of the new law will be a low tax rate for the return of US capital currently in tax havens, and according to some estimates, it is thousands of billions of dollars.
If the capital starts to return, it could lead to a faster rise in US inflation rate and interest rate rises, which is generally good for the exchange rate. But it should be kept in mind that the dollar is still overvalued by many parameters, so it is questionable whether the tax reform will lead to more interest in buying US currency than it will be an interest in selling.
Admiral Markets analysts believe that the 2018 Trump reform will lead only to the slowdown in the weakening of the dollar against the euro, pound and other world currencies.
During 2017, the dollar weakened against the euro by about 11%, and in the coming months it could continue to weaken, regardless of the new tax law.
Situation today
Lately, US billionaire Warren Buffett said his conglomerate’s profits were boosted and earned $ 29 billion as a result of President Donald Trump’s tax reform.
Also, The US tax reform, which was signed by President Donald Trump at the end of last year, is beginning to yield results.
According to the United Nations Conference on Trade and Development (UNCTAD), US companies, driven by lower taxes, could transfer nearly two trillion dollars (two thousand billion) to the country, which they have so far held abroad.
Trump’s tax reform, to date the only successful project of its pre-election program, allows US companies to transfer large assets now in the world through lower taxes to their country of origin.
For the first time, the American technology giant, the world’s most expensive firm, Apple has recently announced that it will return about a quarter of a billion dollars to the United States.
This company, encouraged by a more favorable tax policy, also announces that it will invest $ 350 billion in the next five years and open 20,000 new jobs.
In addition to Apple, large amounts of money accumulated outside the United States and other American technology companies – Microsoft, Cisco, Alphabet, etc. About 40 percent of the funds abroad are held in Britain and in its overseas territories such as the British Virgin Islands.
Small-business owners are seeing tax reform as positive income, while on the other side the US financial company Citygroup reported a loss of $ 18.3 billion in the fourth quarter of its profit in 2017, as it had to write off more than $ 20 billion in amortization due to new tax rules in the US.
Still, Citygroup officials state that the new tax law, in spite of that write-off, will make a long-term benefit to the company.