“Is now really the time for massive tax cuts?” The US economy is showing some impressive stats this quarter. Despite the hurricanes GDP growth is still hovering at 3% and the unemployment rate is right in the middle of the range of the natural rate of employment at 4.2% (Egan, 2017). However, Trump still believes the economy needs a large tax-cut, in fact he wants to enact “the BIGGEST tax cut” according to his Twitter (Egan, 2017). Not surprisingly, many economist disagree with Trump’s plan. The current idea Trump has is to cut the corporate tax rate by 15%, taking it from 35% to 20%. According to the Tax Policy Center estimates this plant would cut “federal revenue by $2.4 trillion over 10 years and by $3.2 trillion over the second …show more content…
In September the savings rate was 3.1%, which is the lowest it has been in the past ten year (Bartash, 2017). In fact, it was 2007 when we last saw rates this low, specifically in December when the savings rate was 3.7% (Bartash, 2017). Over the last ten years the economy has been recovering from a recession which can be interpreted from the graph in the article (Bartash, 2017). There are two instances in which savings dramatically shot up and now they are declining almost as quickly as they rose. The unemployment rate is also seeing similar results reading at a 17-year low of 4.2% (Bartash, 2017). These two rates are clues to American’s spending habits, in that they are steady. However, these spending level are not likely to increase unless consumers see a rise in their income levels. Predicting future rates is difficult at the moment with Trump’s tax plans looming overhead. Until the finalized plan is made up and released the direction of the economy is questionable. With savings reaching record low rates it can be safe to assume that investments have been on the raise. This can be a good indication of a well functioning economy since consumers feel confident enough to lower their level of savings. This is most likely linked to the decline rate of unemployment, as more people gain job security they will be less likely to be
This idea of reducing taxes to increase investment within the economy sounds like a good idea but hasn’t lived up to its expectations historically. The idea of supply side economics wasn’t a new idea for the American tax code. During the early 1920s, income tax rates were cut multiple times which averaged to a total of most rates being cut by a little less than half. The Mellon Tax Cuts named after Treasury Secretary Andrew Mellon under Presidents Warren Harding and Calvin Coolidge. He believed that changes in income tax rates causes individuals to change their behavior and practices. As taxes rise, tax payers attempt to reduce taxable income by either working less, retiring earlier, reducing business expansions, restructure companies or spending more money on accountants to find tax loopholes. If executed properly tax cuts can actually benefit economic growth, data from the Internal Revenue Service(IRS) showed that the across-the-board tax cuts in the early 1920s resulted in greater tax payments and larger tax share paid by those in the higher incomes. As the marginal tax rate on the highest income earners were cut from 60 percent or more to just 25 percent, the amount that this tax group payed soared from around 300 million to 700 million per year. (See Figure 2) This sudden massive increase in revenue allowed the U.S. economy to rapidly expand during the mid and late 20s. Between 1920 to 1929, real gross national product grew at an annual average rate of 4.7 percent and
The interest rates are expected to reach 7.0% by June, the most severally effected by these constant raises are shareholders. Because of these immediate effects market economists are largely against the interest rate hikes. Their position is that the average inflation rate over the past three years has been at around 2% close to the markets expected inflation rate of 1.9%. The economy is on a sixteen year run, continually moving forward. The historical data is there however; the consumer price index was at 1.6% over the past twelve months and the March year over year rate was at 3.7%
Heated debates over tax cut have always been one of the central economic themes on the American political table. Since taxes relate directly to the quality of lives, it is by no means surprising to find people showing significant concern about policies regarding cutting or raising the amount they have to pay. The idea that lowering tax rate makes room for growth has remained generally popular among the majority, taking a possible decrease in individuals’ tax burden and increase in productivity into account. There is, however, extensive research conducted on the topic that produced controversial results. Despite its appeal to instant benefits for one’s saving account and investment, reducing tax rate has yet to show a definite positive effect
More than 35% of American adults are obese and as a consequence, are at increased risks for health issues such as heart disease, high blood pressure, and diabetes ("Overweight & Obesity"). The U.S. taxpayer is supplementing much of the cost to treat obesity related health issues through public health programs such as Medicare and Medicaid ("Economic Costs"). A positive externality will occur in the form of decreased health care expenditures on Medicare and Medicaid. The U.S. government should impose an excise tax on soda and other beverages that contain sugar. Consumers who drink excess sugary beverages impose a negative internality on their health; as well as imposing a negative externality on the American
During the Federal Reserve meeting in April 2016, the range was left unchanged for federal funds at 0.25 percent to 0.5 percent (TRADING ECONOMICS, 2016). Labor markets experience growth confirmed by policy makers, yet economic activity was monitored as being slow (TRADING ECONOMICS, 2016). The risks associated with the financial developments of the country have ceased (TRADING ECONOMICS, 2016). The average percentage of interest rate in the U.S. averaged at 5.8. March of 1980 a record high was recorded at 20% (TRADING ECONOMICS, 2016). The lowest interest rates were recorded in the month of December 2008 at 0.25% (TRADING ECONOMICS, 2016).
when savings are high, many people will be willing to save, but the banks will hold the money from investing may till the saving rate get low. In my opinion, the United States is not in that situation now because right now the economy is weak. The federal Reserve has the rates about as low as they can go so that once companies start spending and borrowing again, it’s as easy as possible for the banks to lend them money at a very inexpensive rate. The Federal Reserve will help to solve that problem by implementing and directing Monterey policy to create favourable conditions that result increased employment and price stability through management of the money
How would feel if your personal benefit was bad for America? There is a tax relief policy that President Trump passed, to help the American people. It lowers that taxes that Americans have to pay, but it makes America even more in debt than the country already is. “It cuts the corporation tax rate from 35 percent to 21 percent” and taxes for individuals “tax rate will drop to 37 percent” (Amadeo,2018). How are we supposed to pay off the debt if the only way the government can get money is from taxing the citizens?
The second primary reason that the economy is seemingly stuck in low gear is because consumer spending is way down, just as home values are way down, and this has led to a much higher savings rates rather than consumers making purchases discretionary and high-ticket items in general.
This may sound like a tax plan that will relieve the financial burden on lower-income taxpayers, directly benefiting the poor, but in actuality, cutting taxes for all in a regressive manner gives substantially more money to the wealthiest taxpayers and a very small amount to lower income taxpayers. According to his plan, a typical American family of four will be able to keep at least $1, 600 more of
The encouragement of economic disparity because of these tax cuts is bad for America. The US should be aiming for more social and economic equality for everybody. Tax cuts can slow down the economy by putting more money into the wealthy peoples’ hands and giving less to the people who need it.
On March 15, 2017, the Federal Reserve raised benchmark interest rates to a range between .75 and 1 percent, a move that markets did not expect until later this year. The stock market is flourishing, employment and wages are increasing, and many feel hopeful that the economy is improving. But the Fed raised rates to “prevent the United States economy from overheating”, writes Applebaum. While Trump plans to stimulate
One of the major issues we are facing in the US economy is how much we should charge in regards to the corporate tax rate. Corporate tax rate is imposed by the government and determines how much a corporate business will pay in taxes at the end of the year. Trump plans on decreasing the corporate tax rate from 35% to 15%. Out of the 34 countries in the OECD, America ranks first with a 39.1 percent corporate tax rate, compared to an OECD average of 24.1 percent. Along with trump, I think that we should reconsider the corporate tax rate. If we were to lower the rate than companies would have more money to spend and put back into our economy. Although I agree with Trump, there are several factors that affect this decision and there are many
The United States debt and defecit is a major problem in our society. One thing I would propose to the President would be to tax the rich. Time. It's useful to keep in mind how the rich are different. When you are poor, you are willing to trade your time to earn money. When you are rich, you trade your money to get more time. For example, the rich hire people to clean their homes, and they don't waste time shopping for bargains. In business school I learned that when people have different preferences, you can usually find a way to engineer a deal. Gratitude. Imagine that the government arranges to provide genuine person-to-person gratitude to the rich in exchange for higher tax rates. Suppose (bad idea alert) the government makes it a
The unemployment rate in the United States has improved dramatically over the last two years, from a high of 8.3% in July 2012, to a low of 6.6% in January 2014. In October of 2012, the civilian labor force increased from 578,000 to 155.6 million, labor force participation increased up to 63.8%, and total employment overall rose by 410,000! Since then, the unemployment rate has been falling at a stable rate due to a political push from Washington DC and new employment initiatives. The inflation rate over the last 2 years has been relatively stably, with a few major increases and decreases in 2012 and 2013. It reached a high of 2.3% in June of 2012, and reached a low of 1.0% at the end of 2013. The federal interest rate has remained at a constant .25% over the past few years.
Interest rates on all savings accounts are at record-lows in the UK and are failing to entice customers despite improving economic conditions. Growth has been slow across all savings accounts, apart from ISAs, which have seen growth due to the upper limits being raised every year since 2010, not because of attractive interest rates.