Germany, China, and EU Very Worried!
The change in the capital investment rules gives US firms “a tremendous advantage,” [Gavin Ekins] said. “It’s a pro-capital formation tax bill and this is why other countries are so wary about what the investment landscape will look like.” __ Germans Very Afraid
And as we have mentioned here recently, China is especially afraid of what US tax reform may trigger both inside the US and inside China:
For investors, a U.S. corporate tax rate of 20 percent may create a strong pull for American corporations to repatriate funds from in China, where companies are taxed at a standard rate of 25 percent. Chinese authorities will be “vigilant” to the effect this could have on the yuan, Raymond Yeung, chief Greater China economist at Australia & New Zealand Banking Corp. in Hong Kong, wrote in a note. __ Bloomberg
More possible fallout from the passage of the US tax bill:
Australia’s Finance Minister warned that its passage meant that his country was “falling behind” in global tax competition, and that Australia’s growth rate might fall by up to a third unless it responds. Accordingly, he promised that Australia will soon be slashing its own corporate tax rate by at least one-sixth, from 30 percent to 25 percent.
Similarly, in the European Union, Austria’s new government has just announced that it is considering a similar reduction.
This comes on top of Norway’s one-point rate cut from 25 percent to 24 percent this month, President Macron’s recent decision to slash France’s corporate rate by nearly a fifth from 33 percent to 27 by 2022, and the United Kingdom’s decision this past April to cut its corporate rate from 20 percent to 19 percent.
Just this week, too, Argentina’s conservative President Macri has announced plans to cut Argentina’s corporate tax rate from 35 percent to 25 percent by 2020. This comes on top of the deep reforms to public pensions that he narrowly force-fed through Argentina’s Congress just this week.
My interviews with key global tax analysts around the planet confirm that several other leading OECD countries, including South Korea, Mexico, and Chile, are also actively considering a new round of corporate tax cuts, in response to the U.S. measure. __ Tax Armageddon?
(Interested readers may want to read the full article above, which is highly biased against the tax bill. If so, be sure to read through to the comments.)
In the US, Democrat Party politicians are angry that a lot of money that they naturally felt belonged to them, will be returned to the people who actually worked for it.
80 percent of Americans will see a tax cut in 2018, and that the average cut will be $2,140 — which might be something to scoff at in D.C., but I imagine a bunch of voters surprised by these savings will be less cynical. Only 4.8 percent of Americans will see a tax increase.
Big Employee Bonuses Triggered by US Tax Reform Vote
AT&T announced that once President Donald Trump signed the bill into law they would “invest an additional $1 billion in the United States in 2018 and pay a special $1,000 bonus to more than 200,000 AT&T U.S. employees.” AT&T further noted that if Trump signed the bill before Christmas that the company will receive the bonus over the holidays.
… Boeing announced an “immediate commitment” to investing an additional $300 million in three areas that will directly benefit their employees:
$100 million for corporate giving, with funds used to support demand for employee gift-match programs and for investments in Boeing’s focus areas for charitable giving: in education, in our communities, and for veterans and military personnel.
$100 million for workforce development in the form of training, education, and other capabilities development to meet the scale needed for rapidly evolving technologies and expanding markets.
$100 million for “workplace of the future” facilities and infrastructure enhancements for Boeing employees.
… Fifth Third Bancorp, a bank headquartered in Ohio, announced that they would raise the minimum hourly wage for all employees to $15 following the tax reform bill and would give a one-time bonus of $1,000 to more than 13,500 of its employees.
Wells Fargo announced that they will increase their minimum hourly pay rate to $15, and will “aim for $400M in philanthropic donations next year due to the newly-passed GOP tax bill.”
Comcast announced that they will give $1,000 bonuses to over 100,000 “eligible frontline and non-executive employees” & invest $50 billion over the next five years in infrastructure “based on the passage of tax reform.”
FedEx announced that the company will ramp up hiring in response to the tax bill, The Washington Post reports…
… CVS Health announced in October that if the corporate tax rate went down,it would create 3,000 permanent new jobs. __ Instant Boom
Tax Reform is Controversial
Normally coherent economic commenters such as Mike Shedlock have made total asses of themselves over this particular issue, although they should have known better. Democratic politicians have taken a risk by assuming an “anti taxpayer” guise and making the issue of supporting American workers and American businesses into a partisan issue. If indeed an economic boom should occur, the resulting shift in public sentiment may send campaign contributions flying to the opposite political camp.
Wall Street sheisters and scammers who have made $millions off of the old tax regime are drowning their sorrows in bloody Marys.
Much More Swamp to Drain
President Trump has worked hard since inauguration day, turning back Obama-era poison pill regulations which have been keeping the US economy in the doldrums much of the past decade. There is much more work to be done than has been achieved to this point. More
It should be obvious that no one in the mainstream will be thanking Mr. Trump, regardless of how much “unexpected” prosperity ensues from his cleaning up and streamlining of government policies. Just as Ronald Reagan has become an “eternal boogeyman” to media, academia, foundations, non-profits, and the deep state — so will Donald Trump always be hated by these leftist swamp dwellers and slime creatures. But so far, Mr. Trump does not seem much bothered by such things, and uses his tweets strategically to bring the slippery crawlers out into the open where they can be exposed.
Obama’s $10 Trillion in Government Debt Cannot Be So Easily Cancelled
While President Trump can cancel and revoke Obama’s caustic executive orders, he will find it impossible to sign away Obama’s ruinous debt legacy. Only by boosting US prosperity and economic growth can the effects of Obama’s deliberately ruinous years be neutralised.
Peter Zeihan offers reason to hope that the US’ unique geopolitical position may help facilitate the work that President Trump has set out to do: (skip ahead to 3:30 in the video)