By Robert Donachie
Americans’ support for the recently signed Republican tax reform bill is soaring, growing nine percent in favorability since Christmas.
Forty-six percent of Americans either strongly or somewhat approve of the law as of early January, compared to just 37 percent when the bill was entering the final stages of debate in late December, The New York Times reported Tuesday.
Americans are also becoming increasingly optimistic when evaluating their own finances and the overall economy. Increased optimism is likely due to large stock market gains, increasing economic growth and other positive economic indicators.
Big business leaders are also increasingly positive about the state and future of the American economy.
JP Morgan Chase CEO Jamie Dimon thinks 4 percent economic growth this year is absolutely a possibility.
“The economy is doing quite well,” Dimon told Fox Business’s Maria Bartiromo last week. “If we have a couple of years of good growth, that could justify the markets where they are. 4% economic growth this year is possible.”
The U.S. economy grew at a 3.2 percent annual rate in the third quarter of 2017, posting the best back-to-back quarterly growth rates in three years. Strong growth is only expected to continue, as some economists are anticipating stronger fourth-quarter growth figures following the passage of the GOP tax reform bill.
The Federal Reserve Bank of St. Louis economists released a prediction last week that could give Dimon’s predictions some more credibility.
The economic research team at the St. Louis FED estimates that there is only a 4 percent chance the U.S. economy enters a recession in 2018.
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As a tax preparer, I would like to see more detail on the projected increase in tax for some folks. Since the VT tax return in 2018 will begin with AGI instead of Taxable Income from the US return, so the use of itemized or standard deduction on the fed return will have no impact on VT tax in the future.
What has been said about the current estimate of tax increase assumes that the VT legislature isn’t going to change anything in the allowed deductions on the VT return. That of course is ridiculous. The legislature changed to AGI precisely so they could fiddle with deductions on the VT return.
As an example they could allow the full property tax deduction on the VT return even if it is above $10,000.
Remember that VT took away the state/local income tax deduction on the VT return a few years ago that was designed to increase the percentage of taxes paid by the “wealthy”. Given the limited information available to us so far, it appears the federal tax bill is doing the very same thing. I have estimated several of my clients 2016 returns using 2018 rates and find that mostly only relatively wealthy DINKS will experience a tax increase in Vermont. The vast majority of my clients will experience a tax decrease at the federal level next year.
Anyway my point is the projections are ONLY a starting point. They will not be what actually happens because the legislature has ample time to adjust the deductions allowed on the VT return to mitigate any perceived increase in VT income tax.
The Trump tax cut, which will be an overall boost to the US economy, passed almost a month ago.
The state Department of Taxes, using its micro-simulation software, has been studying the impact on Vermont economy for 3 weeks.
Scott was briefed. State economists Karr and Cavet were briefed. It is likely, most legislators were briefed as well.
The general public, including myself, knew nearly nothing about the increased tax numbers until VTDigger published this article.
State economists Karr and Cavet predict:
– The Trump taxcut will increase state taxes by $30 million in fiscal year 2019, and $38.3 million in fiscal 2020,
– Already-overtaxed married couples filing jointly in Vermont, earning between $125,000 and $500,000 will be hit even harder by the increase in state taxes,
– Corporations will see about a 14% reduction in federal tax RATES. How about regarding STATE tax rates? Will the state take away that federal reduction?
The state taking more money from already-struggling middle class is definitely NOT good news.
The feds taking less money from already-struggling Vermont businesses is definitely good news.
Almost all legislators and many state workers, filing jointly, have household incomes in excess of $125,000
Scott pledged not to increase taxes, fees and surcharges and not to impose any NEW taxes, fees and surcharges.
There is no rational choice except to level-fund the state budget, and to restructure, merge and sunset various state programs and reduce headcounts for increased efficiency.
Increasing state spending based on inflation is not viable, as the anemic, near-zero, real-growth Vermont economy would not be unburdened from the wet blanket impact of excessive taxes, fees, and surcharges, and onerous rules and regulations.
“If we can determine if there is one sector affected more than others, we want to do what we can to keep them whole,” Scott said. “If we determine it’s the middle class paying more and it’s actually creating more of a burden, then we need to take action, because it would be bringing more revenue into the state.
“If we’re seeing substantial increase in revenue as a result of federal initiatives, we should do what we can to provide relief,” he said. “We don’t want Vermont to be an outlier so we don’t further burden Vermonters.”
All while Vermont ranks 5th on dependency of the federal gov’t. NH, on the other hand, 35th!
https://smartasset.com/taxes/states-most-dependent-on-the-federal-government