What benefits companies could benefit you
Whatever you might think of our current president, you can’t say he doesn’t think big.
The Trump-GOP tax plan just announced has the potential to affect retirement savers in fundamental, long-term ways that could be positive for many Americans. The plan is a long way from reality and is likely to see some changes before becoming law.
For now, here’s the thumbnail version:
• Corporate taxes fall to 20% from the current 35% (and some business deductions end)
• A possible one-time lower rate on repatriated corporate income held abroad, perhaps at 10%
• A 25% rate on “pass-through businesses,” whose owners now pay higher, personal income rates
• Three tax brackets — 12%, 25% and 35% — rather than the current seven
• A near-doubling of the standard deduction, the first dollar of income taxed, to $12,000 per individual and $24,000 for married couples
There’s more, such as a possible refundable child tax credit and the repeal of the estate tax, but let’s focus on what happens to the retirement investor.
If you work and make enough money to save, chances are you save into a 401(k) plan at work or put money into a personal IRA. So far, so good.
If you’re smart, you then invest that money in stocks DJIA, -0.05% and, perhaps, bonds and other securities. After all, you want your cash to grow faster than inflation, and stocks are the way to get that long-term growth.
Now, about taxes. Some will grumble that the corporate rate is low enough, or that the effective taxes paid by companies is low already.
But consider what a corporate tax cut means for retirement savers with investments in the stock market. Sure, lower taxes might mean more jobs. But one thing it means without a doubt is higher corporate income — money that goes to the owners of U.S. corporations.