Question

You would be amazed how much we learn from each other.

One of the latest significant national economic topics for discussion involve President Trump's tax cut. You may address any of the following questions to earn your points this week:

What are your thoughts on President Trump's tax cut?

How will the tax cut help businesses?

How will the tax cut help international businesses?

What are your thoughts on tariffs on imported goods?

What will be the economic impact on big corporations?

How is the Greater Austin area benefiting from tax cut?

Will the tax cut affect home prices? Will it have an effect?

How will the tax cut affect the average citizen?

Will the tax cut have an effect on students?

Will the tax cut have an effect on college expenditures including tuition?

If you were the President, how would you use the government's taxation power?

Answer 1

Since only one question needs to be discussed , I have choosed the question :

How will the tax cut help businesses?

Ans :

The maximum corporate tax rate was earlier 35 percent which is now lowered to 21 percent. This was found lowest since 1939. Though United States has the highest tax rates many corporates don’t pay that much tax. They can avoid paying more with the help of their tax advisors and hence on an average 18 percent is recorded to be paid.

It has raised standard deduction limit to 20% for pass through entities which include sole proprietorships, partnerships, limited liability partnerships and S corporation’s real estate companies, hedge funds, private equity companies etc. Though the limit of deduction ends after 2025.

The act limits a corporation’s ability to deduct interest expense to 30 percent. Carried interest is now taxed at 23.8 percent instead of top 39.6 percent income rate. For this lower rate, the firm must hold the asset for a year.

The act eliminates AMT which had a 20% tax rate that strikes in if the tax credit of a firm’s effective tax rate goes below 20%. Under the AMT earlier the companies couldn’t deduct Research and Development expenses. Though this elimination of corporate AMT will result in $40 billion deficit.

There was change in Trumps tax plan regarding the concept of worldwide tax system. It is now changed to territorial tax system. Under the world-wide tax system, earlier MNC companies were taxed on foreign earned income. And it was taxed when the income was brought at home. Due to this that foreign income was not brought to the home, and kept it to the place where it was earned. To prevent this from happening Trump removes the tax on it so that it can now be invested in US itself.

In this way, there are various factors some good some bad effecting businesses with the changes made in taxation.