IHS Markit sees United States (US) economic growth in 2020 could contraction around 4.8 to 6.1 percent, it said in the latest report - Photo by White House

JAKARTA (TheInsiderStories) – United States House and Senate has voted to pass the Republican tax plan, a US$1.5 trillion proposal that gives corporations a permanent and massive tax break, temporarily cuts rates for individuals.

The final bill lowers the corporate rate from 35 per cent to 21 per cent, gives pass-through businesses like the Trump Organization a 20 per cent tax deduction, increases the standard deduction, expands the child tax credit, and temporarily lowers individual rates across the board.

The House will vote again Wednesday morning on minor last-minute changes to the bill made in Senate to comply with budget rules.

This bill permanently cuts the corporate tax rate from 35 per cent to 21 per cent to bring it closer to that of countries like Canada, which has a 15 percent corporate tax rate, or Ireland, which has a 12.5 per cent corporate tax rate.

Republicans also repealed the 20 per cent corporate alternative minimum tax, which was set up in the current tax code to ensure that corporations paid at least some taxes.

The bill also changes tax provisions for American companies abroad: Corporations will no longer have to pay corporate taxes on money they claim to have earned abroad — a move that could encourage companies to keep income in foreign tax havens. Corporate income brought back to the United States will be taxed between 8 and 15.5 per cent, instead of the current 35 per cent.

Democrats have railed against the legislation as a giveaway to the wealthy and the business community that will widen the income gap between rich and poor, while adding US$1.5 trillion over the next decade to the US$20 trillion national debt, which Trump promised in 2016 he would eliminate as president.

Asian Shares Slip after the Announcement

Asian shares fell on Wednesday, taking their cues from Wall Street with investor enthusiasm toward US tax changes ebbing as the long-awaited reform bill wound its way through Congress, while higher US Treasury yields underpinned the dollar.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 per cent in early trading, while Japan’s Nikkei stock index also edged down 0.2 per cent. The Dow Jones Industrial Average shed 0.15 per cent, the S&P 500 lost 0.32 per cent, and the Nasdaq Composite dropped 0.44 per cent on Tuesday. (*)

Written by Elisa Valenta, email: elisa.valenta@theinsiderstories.com