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Gavin Chinn

Tax Cut and Jobs Act

Gavin Chinn on February 1st, 2018

Easily the biggest financial event of 2017 was the passing of the Tax Cut and Jobs Act (TCJA), aka the Tax Reform Bill. This was done to fulfill a campaign promise made by President Trump, with the goal of lowering taxes for individuals and corporations. And while it is generally agreed upon that the law will increase the deficit over the next ten years, it is less certain as to what degree of increased growth could accompany that debt. (Please note that this is not tax advice. The TCJA is complex and still being interpreted. Please consult a tax advisor for more information)

For individuals, most of the tax brackets have been lowered. Notably, the 15% and 25% brackets have been reduced to 12% and 22%, respectively. On the higher end, the top rate of 39.6% has been dropped to 37%. Besides brackets, the standard deduction has been raised (although the personal exemption has been eliminated), child tax credits have been increased, and deductions for state and local taxes have been limited (among other provisions)*.

More important to this blog, is the corporate side of the tax act. This is the part that may have the bigger impact on the economy and the markets. Thanks to this new law, corporations will be taxed at a flat 21% rate. This is down from the maximum federal statutory rate of 35% (not including state and local taxes). This should save money for most US corporations as the average tax rate is 29%** (third…

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