Patrick Cullen
Mrs. Straub
AP Economics
1 January 2018
How Trump’s Tax Plan Affects The Economy
Just over a week ago, President Trump signed off on a new tax plan for the nation. The two main impacts of the bill are that the income tax on the average consumer will fall and standard deduction will double. Though the income tax will be falling and inevitably enhance consumer confidence, the doubling of standard deduction will negatively impact other markets such as the real estate industry. So does the new tax plan negatively affect the market or will it help improve it? There are clearly both benefits and drawbacks to this new plan, so let’s review them more closely.
The first of the two main impacts is the cut on the income tax rates. Every employed working class american contributes to the income tax. It is probably one of the most bitter taxes that americans pay considering it takes away from our well earned money, so many of America’s consumers will be quite excited to see that they will acquire a bit more revenue due to the bill. This is not only good for the individual consumers, but also for the market as a whole. In an article about consumer confidence during holiday shopping, Mark Tepper wrote, “So far, holiday spending has been strong, which bodes well for the strength of the consumer. In November alone, retail sales were up 5.8 percent year over year, and Mastercard is projecting that we'll see the strongest holiday season sales growth since 2010, which should surpass 5 percent year-over-year growth”(Tepper). This shows that the lowered income tax instilled on consumers will give them more of an incentive to buy and bring more money into certain markets. This is a prime example of how the tax bill will benefit the overall economy.
Though the income tax will be falling and inevitably enhance consumer confidence, the doubling of standard deduction will negatively impact other markets such as the real estate industry. Most everyone has budget no matter how high or low for annual necessities and expenses. When the price goes up for something then the opportunity cost of purchasing it is that you have less money to spend on something else that you may need. What this does is hurts the market of that other potential product that you could have bought because it takes revenue away. The doubling of standard deduction does just this. In an article about the effects of the new plan, Kimberly Amadeo wrote, “The National Association of Home Builders and the National Association of Realtors opposed this. As more taxpayers take a standard deduction, fewer would take advantage of the mortgage interest deduction”(Amadeo). This shows a negative impact because the doubling of the standard deduction will cause consumers to not take advantage of other deductions in markets such as real estate. The doubling of deduction is a negative externality to the real-estate market.
Overall the plan is supposed to benefit our overall economy, but you can’t make progress without drawbacks. The plan will benefit your average consumer because it will give the consumers more incentive to buy due to the income tax cuts. On the other hand there will also be a drawback to the increase in deductions. So even though it is going to benefit the average consumer, it negatively affects certain industries.
Works Cited
Amadeo, Kimberly. “What to Do Now to Prepare for Tax Changes”. The Balance. Web. 1 Jan. 2017. https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968
Tepper, Mark. “The consumer has never been stronger, and this could just be the beginning”.CNBC.Web1 Jan. 2017. https://www.cnbc.com/2017/12/21/the-consumer-has-never-been-stronger-and-this-could-just-be-the-beginning.html
I think it is interesting that consumers will benefit more, however the market could get hurt. I believe even though consumers will pay less in income taxes, this won't translate to consumers spending more in the market, something that will hurt these markets as consumers will covet their extra revenue by not spending it.
ReplyDeleteThis is good for the economy short term but eventually this will probably hurt the economy. This bill will raise the deficit by almost 150 billion dollars over a decade. It will end up increasing the GDP by .7% which is good but not going to be enough to cover the deficit that it created. It will increase the national debt but it will boost the economy. Once the personal tax cuts end in 2025 then middle income Americans taxes are expected to increase. It is good for the economy in the short term.
ReplyDeleteI agree with your statement. The economic gains will be lost with how much it costs to put into play, and the middle class assistance will be overshadowed by similar things for the rich.
DeletePatrick, This is an eyeopening article you wrote. I only thought the bill would make things worse for the market, because there may be too much money for the big companies, but your information and quotes really helped me understand how it will help our country as a whole and expand our market for the future. I Think its cool that the bill is suppose raise the deficit by $150 billion by the time it is done. Also great piece the words in your piece helped me understand the bill better from and economical stand point
ReplyDeleteIt is very interesting that consumers can benefit from this act, but the market still has a chance of getting hurt. There is a chance that the consumers won't spend more in the market which could then hurt the market itself. In the short run, this could help the economy and cutting income taxes will raise the deficit by almost $150 billion. This is a very interesting topic and one to keep an eye on as it goes into full effect over the next couple of years.
ReplyDeleteWhile it may by some be viewed to be having a positive effect on our nation's economy, public opinion has been recorded to be overwhelmingly negative towards the new tax bill. Many individuals have been polled and view this newly implemented policy to be favoring those on the higher end of the income range, while temporarily advantaging (and eventually disadvantaging) those not in the top couple income tiers. In fact its been even predicted by several sources that eventually the amount paid for certain Americans falling under a certain amount of income range will increase, thus disadvantaging those at the lower end of the money making spectrum. It also has been predicted that it will raise the deficit, and therefore will require some possible spending cuts later if they are not resolved by the supposedly exaggerative predictions of growth that our country might experience.
ReplyDeletePat,. I totally agree that this bill will help our country as a whole. It will expand our economy a great amount as well as keeping hard-working american's money in their pockets as opposed to feeding the government by cutting down on that income tax. I really enjoyed your piece. With writing like that you should consider applying for a job as an Anchor at Fox News, I would watch. Any who, good job Pitter Patter.
ReplyDeleteI respect hard work which is why I totally agree that this will benefit our country as a whole. I'm not a big fan about government hand outs on the other hand. If you don't work why should you be rewarded with free handouts. In my opinion that is the problem with America and people in life is that they put in mediocre work and expect results. If you want money earn it. But I do like how this topic relates back to econ with income tax and such. Well done Patrick.
ReplyDeleteI'm right with Jack on this one in consideration to handouts and people just being given things that they don't even work for. In my opinion this would be very bad as it will shape our future generations into free loaders and no one is going to be motivated to work hard and earn money while obtaining success on their own. Overall it truly just creates a mold for bad work ethic among the citizens of our country which I don't think is a good thing at all. Like Jack said, the tax topic was very interesting and especially with all the things going on in our modern day world I found this very relevant.
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