On November 2nd, 2017, we saw the details of the highly anticipated tax plan being released. Given the magnitude of this plan, it is safe to forecast a huge change in the way Americans pay taxes. Since a large proportion of citizens voted for the opposite to what has been presented, let’s look at how this change will affect American households and the country’s national debt.
New Cuts – What to Expect?
The new tax plan looks to cut tax rates and also cut contributions in a number of vital areas including medical programs such as Medicare. Another program being scrapped is local deductions and student loan deductions, while corporate tax sees a 15 percent reduction. With all these changes, what does this mean for our national debt? Well according to calculations, the revamped tax plan will actually add $150 billion a year in national debt. In other words, the fiscal deficit wouldn’t be decreasing but increasing.
However, there are no plans to increase revenues elsewhere or by any other means. Ultimately this leads to reduced national revenue and increased national debt. In a decade, this would easily place national debt at its highest since World War II. Considering America’s current debt of $20 trillion and $12.7 trillion in consumer debt, it’d be safe to say things aren’t looking very good.
However, it has to be said that America isn’t the only country facing such a predicament. A great number of European nations are also dealing with a challenging economic situation, not to mention some of the most indebted African countries, like Uganda and Namibia.
As a percentage of America’s GDP, we now owe more than the country generates annually. By cutting taxes garnered from citizens and corporations, the government will see a federal deficit.Trump’s administration argues that this increase is necessary to achieve the aggressive growth he laid out, most notably the 6 percent annual growth in the American economy. So how does the administration plan to pay for this? [Read more…]