After long months of political wrangling, the Donald Trump tax reform bill was finally passed by the US Congress by 224 votes to 201 on December 20, 2017. While the passing of the bill marks a huge political victory for Donald as the tax cut was one of his major campaign promises besides scrapping the Obamacare, what stakes does the bill to be passed into law in the days ahead, hold not only for the US economy but also the world economy given the fact that the US is the engine of global economic development. The reform package is projected to add 1.5 trillion US dollars over the next decade to the 20 trillion government debt, which Donald Trump promised to eradicate.
While Trump hails the reform as the “largest tax cut in the history of our country”, democrats label it as “government for sale” with prominent senator Elisabeth Warren quoted by the BBC website as describing it as a “heist”. But beyond the partisan debate, non partisan analysts say the greatest beneficiaries of the package will be the super wealthy multinational corporations and commercial property industry. The US tax policy centre estimates that the plan will see most tax payers having lower tax bills but this will leverage up by 2027 when it expires and the overall change would be negligible. 53 per cent of the US tax payers, most of them in the lower income brackets, would face higher bills.
The package however seems to be have triggered world economic growth as the IMF Managing director, Christine Lagarde told the assembly of finance ministers from Europe, China, Japan and emerging Asian economies that the world economic growth engine had all witnesses an “accelerating cyclical upswing”, urging the IMF to upgrade its global economic forecast to 3.7 per cent from 3.6. a figure which according to Kamal Ahmed, an economic analyst, is in sharp contrast to last year’s sluggish 3.2 per cent, the lowest financial slump. With the world coming out from the financial stupor, the 1.3 trillion US dollars tax cut is likely to boost not only the US economy but also that of the world. As the US joint Committee on Taxation puts it, tax cuts serve as “economic incentive to invest for businesses and to work and spend for employees”.