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1. Congress recently passed the Tax Cuts and Jobs Act (TCJA). What is the goal (at...

1. Congress recently passed the Tax Cuts and Jobs Act (TCJA). What is the goal (at least stated goal) of the TCJA? Who is supposed to benefit? Focusing on the business taxes, what are the primary features of the TCJA? Will the TCJA make U.S. businesses more competitive? Why or why not? What are most corporations doing with their tax savings (cite some evidence)? Does anyone lose from the TCJA? If so, who and why?

2. We spent a day discussing the mergers of AT&T/Time-Warner and Disney/21st Century Fox. Why does AT&T wish to acquire Time Warner? What is the benefit to the merger? Who loses? The U.S. government doesn’t generally get involved with vertical mergers, why is the government contesting the AT&T/Time-Warner deal, but not (at least yet) the Disney/Fox deal (although the U.K. has expressed concerns)? Do you believe AT&T should be allowed to acquire Time-Warner? If so, should they place any restrictions on the merged firm?

3. What is the Federal funds rate and how does it affect the economy? The Federal Reserve (FED) increased both the Federal funds rate and their interest rate expectations during their March meeting. Why? How did the market react to the news? What effect, if any, did the TCJA have on the FED’s growth and inflation expectations?

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Expert Solution

Question 1:

The primary goal of the TCJA (Tax cuts and Jobs Act), is too increase the competitiveness of firms and provide the businesses with significant tax cut so that they can create hire more and pay higher salary for the employees. It was passed to create a win-win for the employer, employee and the government. So the beneficiaries are the businesses which pay lower taxes and also the employees you can get a better pay raise with saved taxes and the unemployed who can get jobs from these business. The primary feature of the TCJA is to reduce the corporate income taxes for all business to a maximum of 21% from the current federal tax rate ranging from 34-39% which results in significant tax cuts and savings for the business.

Yes, the aim of TCJA is to make US businesses more competitive and to incentivise firms to produce goods and services in the US rather than import them at lower costs. Corporations are paying higher salaries for their employers, hiring more, reducing prices for customers and providing the dividends for shareholders. If at all someone has to lose, it can be the government and the environment. the government will get lower taxes which will increase the fiscal deficit of US and also the environment since more industries can pollute the environment faster.

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