Happy New Year: Cheers to the Tax Bill!

We have reached the end of 2017 and the President has completed nearly a year in his first term! The Trump Administration can be credited for many achievements, but whether they are considered negative or positive can be debated. Aside from the many, many executive orders that were signed (primarily to undo the efforts of his predecessor) the main achievement was the passage of the Tax Cut and Jobs Act.  Hopefully, you are enjoying the holidays and are preparing for an awesome New Year’s celebration, so the Political Great Whine will only highlight two things to think about as we ring in 2018.

More Disposable Income?
The new tax brackets will take effect on January 1 which means an increase in your take home pay (net pay). If, like many middle-class families, you cannot even remember when you last got a raise then this change will at least make you feel like you got one. Many workers will move to a tax bracket that is 3 percentage points lower so think of it as being similar to a 3 percent raise. It is not much, but it is better than nothing. The pro of this tax bill benefit is that you get to pocket a few more coins, the con is that it totally hurts your chances of getting a real pay raise.  Rather than give real raises, your employer will proudly announce the tax bracket change and subsequent pay increase as a gift from the company…”You’re welcome”.  Look for an email and/or memo from Human Resources to accompany your next pay check after January 1. Don’t spend all of your new-found wealth in one place!

More Jobs or More of the Same?
The selling point given to the middle-class to support the Tax Cuts and Jobs Act despite the massive tax cuts for big businesses (much higher than 3 percent) was that they will no longer move overseas and will instead create jobs here at home.  Despite the fact that the tax bill does not say anything specifically about job creation nor does it require businesses to use their savings to invest in labor, it is believed that they will do so naturally.  It is important that American businesses be held accountable, so we should expect to see an increase in job openings or at least that ever elusive pay raise. Will you see more job openings at your workplace, more money in your salary, or more of the same?

If More Jobs, What Type of Jobs?
To be fair, it is possible that businesses will realize that an increase in labor costs will increase their profit margin and will invest their savings there. However, it will be interesting to see what type of jobs will be created. Will companies open more mid-level and management level positions for workers with degrees and/or several years of experience or entry-level positions that tend to pay less? Or will companies gravitate towards the other extreme of the job spectrum and invest in very high-end tech jobs that tend to require specialized education and experience.  The United States has a knowledge-based economy and company profits are strongly tied to increased automation, so it will be interesting to see how those who have a lot of experience in jobs that no longer exist are able to benefit from the anticipated job growth. Specifically, will businesses invest their massive savings in the Appalachia and Rust Belt regions of the country that have been plagued by job loss and unemployment for too long?

Bottom line — now that we have received the gift of sweeping tax reform for Christmas, will the working and middle-class see an increase in our standard of living?

The Political Great Whine would like to thank you for taking the time to “listen” to me whine in 2017 and wish you a very happy 2018! Hopefully my whining has made you think. If so, tell your friends/family/colleagues that you heard it through the Political Great Whine!

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s