Money

Assessing Trump’s Tax Reform with Only Time Passing so Far

The latest polls indicate that the political environment in Washington is the top economic risk cited by every age, income, gender, racial/ethnic group and political affiliation.

This isn’t a stretch given the fluidity of recent events. In the long run, stock prices will reflect whether President Trump’s policies create more disposable income, boost profits and raise salaries. Cutting taxes does that in the short term, but the long-range goal is to beat inflation through higher salaries and boost retirement plans, which hasn’t been the case for most working families.

Treasury Secretary Steven Mnuchin said Trump’s tax reform will create 1.7 million new jobs, save families $4,600 per year, raise wages by 8% and bring to an end corporate inversions that eliminate incentives to offshore profits and jobs that would prompt corporations to expand and reinvest in U.S. manufacturing. It all sounds good and the stock market has been in rally mode with bated breath leading up to this pronouncement of the “Make America Great Again” tax plan that now has to work its way through Congress.

Critics are already fanning the flames over pitfalls of the Trump tax plan, stating that if it doesn’t find a way to replace lost tax revenue in the early years, the government will have to borrow trillions of dollars to pay its bills. The new tax plan assumes the incentives will result in a 4% rate of gross domestic product (GDP) growth that will drive organic tax receipts, making the plan revenue neutral. After the economy posted first-quarter GDP growth of only 0.7%, which was Trump’s first quarter in office, it’s no surprise the doubters of this grand stimulus scheme are making lots of noise.

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