Is a Tax Cut Coming Soon?

September 9, 2017
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With more and more pressure being lopped on to the economy, “analysts are clamouring for a tax cut to soothe the markets.” Investing Daily has released an article about a potential tax cut and what it could mean for the economy.

This excerpt outlines their reasoning;

Does this scenario sound familiar? A recently elected Republican president promises to reduce taxes to stimulate the U.S. economy. He feels pressured to come up with something big to deflect attention from rising tensions with Russia and knows he made many campaign promises he can’t keep, but this one is important to him.

That may sound a lot like 2017, but the year was 1980 and the President was Ronald Reagan. The following year, the Economic Recovery Tax Act of 1981 (ERTA) was enacted, which drastically cut personal income tax rates and reduced estate taxes for the wealthy.

Unfortunately, the following year the economy slipped back into recession as the federal deficit predictably swelled, resulting in passage of the Tax Equity and Fiscal Responsibility Act of 1981 (TEFRA), which raised taxes in an effort to balance the budget. The Dow Jones Industrial Average fell 17% from the enactment of ERTA to the month prior to the passage of TEFRA, but rallied sharply on the news that higher taxes, and a reduced federal deficit, were on the way.

A tax cut would have a significant effect on not just the markets but also your personal savings. Taking home more money from work is always welcome, but what kind of effect would it have on the markets? To find out the whole story, read more at investingdaily.com.

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