In the parlance of the kids, it’s about to get real. After all the hemming and hawing, gnashing and wailing, the tax bill (apparently) is set to pass. Not only does it preserve pretty much everything good about tax-advantaged retirement accounts, it’s favorable in other, admittedly roundabout, ways.
The Wall Street Journal reports the 21 percent corporate tax rate is a lock. Ideological arguments over income inequality aside, it means businesses will invest—big time. Capital deployment is rarely bad for economic and wage growth, although controversy over the merits of trickle-down economics will surely be renewed.
The corporate tax cut takes effect almost immediately (Jan. 1) which means the benefits will be felt that much sooner. More money means more savings, at least in theory, and even if deferral rates stay static, dollar contributions will nonetheless rise.
For all the talk of presidential incompetence and do-nothing Congress, this is the one that counts. A politically advantageous “Trump Bump” is offsetting a portion of the Twitter insanity, and positive ramifications of Tuesday’s planned action will be felt right around the fall of 2018, an electoral coincidence even traditional holdouts like Susan Collins, R-Maine, can’t ignore.
“Overall, the business community is very pleased with the bill,” Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, told the paper. “If someone would have said 11 months ago, by the end of the year we’d able to produce a bill and get it to the president’s desk that does these things, skepticism would have been sky high.”
Of the 21 percent tax rate specifically, Bradley didn’t mince words. “That’s a home run, there’s no other way to look at it.”
Lord knows, there are plenty of other policy prescriptions to protest, but when it comes to the business and investing environment, we agree.
“How’s your 401k doing?” President Trump recently, and rhetorically, asked.
By all accounts, soon to be much better.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
It’s naive to think that corporations are going to spend their tax savings on workers, whether in 401k contributions or in increased wages. Corporate profits have been setting records for years, while wages have stagnated. What’s been stopping companies from investing all these years? No, the money will go the same place as it’s BEEN going, into the pockets of CEO’s.
Except for this: “AT&T is giving $1,000 bonuses to 200,000 employees after tax bill”
https://www.cnbc.com/2017/12/20/tax-reform-reaction-att-is-giving-bonuses-to-200000-employees.html
Unless you work at AT&T, it means nothing. My fortune 200 company didn’t announce any bonuses even though revenues, profits and stock are all up this year. What they’ve done this past year is add more do-nothing, high salary senior executives while expecting rank and file to continually do more with less.
Yesterday, CNBC reported that only 45% of US workers have a 401-k.
Is the AT&T bonus real or just for show? Since they will be getting the tax savings every year I assume the bonus will be given every year. We will see.
The AT&T thing is a one-time giveaway to employees representing a minuscule portion of the company’s profits and solely designed to earn goodwill in the Trump administration as it decides whether to approve the merger with Time Warner. Period. Just like Wells Fargo’s minimum-wage hike has nothing to do with sudden concern for line workers and everything to do with earning the praise of Dear Leader amid the company’s troubles in federal court. Believing anything else is the height of naiveté.