The Tax Cuts and Jobs Act and the Economy

By Alan Olsen
The Tax Cuts and Jobs Act and the Economy

The largest tax reform in recent history is now upon us and since it has already gone into effect, many people are wondering what comes next. While it won't affect your tax bill this 2017 filling season you should expect to see some changes over the next couple months in the US Economy. While there is no crystal ball that will dictate how the future may turn out, there is a projected estimate of how things may look in the short-term going forward.

The Stock Market

One of the focal points of the TCJA is the corporate tax rate dropping to from 35% to 20%. With the tax rate decreasing it is clear that the bottom lines of many companies will be increasing. And with that increase there will most likely be an increase in the value of their stocks. Whether that will be consistent in the long term is yet to be seen, but in the short term it's foreseeable that we will continue to see the stock market remain strong and the Dow Jones continue to reach all-time highs.

More Green in your Wallet

A vast majority of Americans will be seeing a decrease in their tax bills especially families read more about that here, and an increase in their bank account. It's foreseeable that there will be an increase in spending, thus improving the overall economy. However, only time will tell whether consumer confidence will continue at the high that it reached last November.

Coming Home

While many companies have their physical headquarters in the United States, many have their legal headquarters elsewhere. Over the years we have seen companies from Burger King to Budweiser move their legal headquarters overseas. One of the hopes of TCJA is that many of these companies will be incentivized into moving their legal headquarters back to the US and start paying corporate taxes here instead. The jury is currently out on how many of these companies will move back, but it's foreseeable that we will see more companies coming back to their home roots.

Repatriation Tax

One of the effects of the TCJA has been the repatriation of funds from multinational companies. A repatriation tax is a one-time tax charge to repatriate, or return to its home country, overseas cash or funds. It's estimated that is $2.6 trillion in corporate profits sitting in overseas bank accounts just waiting for a tax break before they can come home. However, Apple may have just set the precedence with their decision to come back. They will be shifting $250 billion in cash back from Ireland to the US and will pay $38 billion in taxes. With Citigroup and Goldman Sach shifting their cash back and paying $22 billion and $4.4 billion. In the short time that the bill has been around there has been over $72.3 billion paid in repatriation taxes.

Wondering how else the Tax Cuts and Jobs Act may affect you and your business? Let us help! Call us today at GROCO and let us help you plan for the future.