Tax overhaul will have a limited effect on U.S. economy, Moody’s says

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"The U.S. tax bill signed into law in December will have a limited effect on the U.S. economy, as companies are unlikely to spend their tax savings on growth initiatives while the tax cut for the wealthy will not trickle down.

That’s according to Moody’s Investors Service in a FAQ on the credit impact of the tax bill published Thursday, which warns of a number of negative consequences for federal debt, local governments, utilities and homeowners.

“We do not expect a meaningful boost to business investment because U.S. nonfinancial companies will likely prioritize share buybacks, M&A and paying down existing debt,” said Moody’s analysts led by Rebecca Karnovitz. “Much of the tax cut for individuals will go to high earners, who are less likely to spend it on current consumption.”

More than three-quarters of the $1.1 trillion in individual tax cuts will go to people who earn more than $200,000 a year in taxable income, who constitute only about 5% of all taxpayers, said Karnovitz.

[…]

“As a result of the legislation, we expect deficits to widen faster than under our pre-passage baseline, resulting in faster accumulation of federal debt, a component of general government debt,” said Karnovitz."
 
Cutting taxes without cutting spending is going to increase the deficit. Increasing the deficit is never good for the economy, since it crowds out investment.
 
lmachine said:
“Much of the tax cut for individuals will go to high earners, who are less likely to spend it on current consumption.”
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In my opinion, this might be right, but it’s wrong in an even more profound way. I’m not in the 5%, though many would consider me and my wife “high earners” even so. My wife really does spend additional money on consumption; mostly for grandchildrens’ consumption. I spend additional money on cattle and equipment.

Either way, it will go right back into the economy, mostly benefitting people who live in America and work hard to produce what we buy.

Personally, I think Moody’s is full of it in this instance.
 
lmachine said:
and paying down existing debt
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so a company pays off debt to their creditor who in turn has that money to lend again to another company who makes a business investment… i’m not seeing the problem
 
The updated withholding information, posted on IRS.gov, shows the new rates for employers to use during 2018. Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables
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I best most employers have not yet started using the updated withholding information, i know mine has not. people will start seeing their “raise” in the form of less taxes being withheld soon.
 
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