What a whirlwind the United States Presidential Election was! It sparked record interest in the Presidential Debates and polls predicted the highest turnout rate of voters in the history of our Presidential Elections. Trump was the third Presidential candidate in US history to win the election after losing the vote in his own home state (Hillary Clinton won Trump’s home state of New York). But now that the dust has settled from the US election, let’s take a few moments to look at Trump’s proposed economic changes and what they mean for America’s Housing Situation, Inflation Rates, Employment Rates, Stock Market, and Income Taxes in the years ahead. Trump has identified a list of things that he plans to enact in his first 100 Days of his Presidency.
We will begin by presenting his Middle Class Tax Relief plan, as that will lead into all the other fiscal policies. During his campaign, he touted that he will favor the middle class and proposed to change the income tax codes to lower the income tax brackets from seven to three. Trump’s proposed income tax rates will be 12%, 25%, and 33%. Under his plan, the number of filers who will itemize their deductions is estimated to be 13 million, rather than the current 45 million taxpayers.
In reality, this plan’s largest beneficiary group will be those in the top 1% of wage earners across America, or the most wealthy. The households that fall within the top 1% of the current income tax brackets will see a jump in their after tax income of 10.2%-13%. Those of us that fall into the medium income tax brackets of 40%-60% of the national average income will in fact only see an after tax income increase of 1.3%-1.8%.
Trump’s plan also proposes to reduce business income tax liability to 15% rather than the average 40% that the businesses currently pay toward their federal and state income taxes. While many small businesses are applauding this change in hopes of having a decreased tax liability, the plan will have a negative effect on the government. As a result, the government will be forced to find another way to generate the revenue loss from these income tax dollars.
Trump’s plan is expected to grow the United States’ economy by 4% a year and create 25 million new jobs to Americans. However, critics tout that Trump’s Middle Class Tax Relief and Simplification Act is nearly impossible to execute and if enacted, the proposed changes will have unprecedented consequences on the American economy. Read the entire article about Trump’s Economic Stimulus plan here.
Furthermore, to jolt income levels for Americans, Trump plans to initiate a local infrastructure construction program. The money invested will be beneficial to toll highways and airports. Interest rates as a result will be on the rise. This plan is actually perfect to stimulate the economy and is 100% on point.
This program will spike the demand for houses, but the interest rates are expected to increase, so they will be more expensive to purchase. As a result, there will be an increase in those families seeking rental options.
The current job market has seen it’s slowest growth rate in three years and is expected to be even lower in the next year. Additionally, it is projected that after Trump’s second year in office, the job market will only see a .3% annual increase, which will be the lowest increase since the 2008 Recession.
Many Americans are also excited about Trump’s plan to repeal and replace the Affordable Care Act (ACA) enacted by President Obama. The removal of the ACA is highly likely under Trump’s administration. However, Trump’s plan is unclear at this point in time, outside of him saying that he will not allow the insurance companies to deny a person coverage due to a pre-existing condition. It is anticipated that President Elect Trump will recommend that Health Savings Accounts (HSA) be used in place of the ACA to pay for qualified medical expenses.
Americans will have the opportunity to purchase healthcare policies across state lines, which will decrease policy costs and premiums, but coverage will still be out of reach for many. However, the replacement of the ACA will result in no further required tax penalties being paid to the federal government to those who are unable to afford said health coverage.
Inflation will also increase as a result of the stimulus package defined by Trump. Copper prices have already seen nearly a 4% increase since his win on November 8th. Alternatively, Gold has seen a drop of nearly 5% since his election to the Presidency. This is in part a result of his plan to place larger tariffs on Chinese imports. This plan is likely to result in a massive inflation rate for America, which is estimated to increase the demand for Gold. Stores that sell products imported from China will also need to raise the prices for these products by an estimated 3% to cover the increased tariffs.
Ten year Treasury Bonds revenues have increased to 2.1% since the election of Donald Trump as our President. This is the highest return level that these bonds have seen since January 15th. Investors are quickly selling their bonds and much of that money has gone into the stock market. The stock market rose 300 points on November 9th, and closed within 25 points of it’s all time high. Even today, the Stock Market is still seeing increases as more Bonds are cashed in and invested.
Currently, the American Job Market is considered to be at “full employment” level. As a result, employers need to raise the wages offered to prospects to attract the necessary talent. Increased wages will increase inflation across the board. Analysts have predicted another recession will occur within the next two years.
What do you think will happen to the American and global economy over the next 4 years under a Trump presidency? Leave your comments below.
This article was updated on November 28