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From RFG Advisor, Tommy Williams | Time Topics: The Tax Plan & the Federal Reserve

by: Tommy Williams
published: November, 20th 2017


Time Topics: The Tax Plan and the Federal Reserve

By: Tommy Williams, President and Founder, Williams Financial Advisors, LLC

"Taxes are what we pay for a civilized society.”

U.S. Supreme Court Justice Oliver Wendell Holmes’s statement is engraved on the front of the Internal Revenue Service building in Washington, D.C. Some people agree with the sentiment. Others believe it to be a logical fallacy. 

It’s likely the tax plan proposed by House Republicans last week had all of them talking, regardless of their position on the opinion spectrum. Some of the changes suggested in the proposal include: 

  • Reducing current marginal income tax brackets from seven to four (12, 25, 35, and 39.6 percent). The New York Times reported, “While the lowest income rate would increase, typical families in the existing 10 percent bracket would most likely be better off because of a larger child tax credit and an increase in the standard deduction.”
  • Repealing the Alternative Minimum Tax.
  • Increasing the standard deduction to $12,000 for individuals and $24,000 for married couples, while eliminating personal exemptions (the $4,050 exemptions you claim for yourself, your spouse, and your dependents).
  • Repealing state and local tax deductions.
  • Reducing (and eventually eliminating) estate taxes.
  • Setting the corporate tax rate at 20 percent. Financial Times wrote, “This will not increase wages or growth by much, and nowhere near the wild claims made by its proponents. But a lower rate combined with a broader tax base is not a terrible idea…To pay for the cuts, the tax law writers have gone after corporate deductions…”
  • Eliminating medical expense deductions. The Hill explained, “Under current law, the IRS allows individuals to deduct qualified medical expenses that exceed 10 percent of a person’s adjusted gross income for the year. The bill would repeal that itemized deduction, effective in 2018.” 

In addition to headline news about tax reform, investors contemplated the appointment of Jerome Powell as the next Chair of the Federal Reserve, bypassing Janet Yellen for a second term. According to a recent New York Times article, although Powell is “…expected to stay the course on monetary policy if the economy continues its steady growth…it is less certain…where [he] would lead the Fed if the economy falters.”

The article further reports:

“Mr. Powell, a member of the Fed’s board of governors since 2012, has consistently voted with Ms. Yellen to slowly raise interest rates and sell off assets that the Fed bought up in the wake of the severe recession of 2008 and 2009. Colleagues consider him a centrist and pragmatist. But he lacks the deep background in economics of some of his predecessors, and he has expressed skepticism in the past about the unconventional measures that the Fed took after the recession. Mr. Powell could also depart from the Fed’s current trajectory when it comes to regulating banks and other financial institutions; [however,] the nominee offered little hint of his thinking during brief remarks in the Rose Garden. White House officials said Mr. Trump was impressed with Mr. Powell’s combination of government and private sector experience. Mr. Powell remains a centrist voice in the Fed’s internal debates, arguing for the Fed to end its stimulus campaign at a slow and steady pace. Over the last year, that has placed him solidly among the majority led by Ms. Yellen.”

And, by the way back to the income tax proposal, I would be remiss if I didn’t remind you of the great will Rogers quote “The income tax has made liars out of more Americans than golf.” Stay tuned.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. This material was prepared in part by Peak Advisor Alliance.

Visit us at www.williamsfa.com. Tommy Williams is a CERTIFIED FINANCIAL PLANNER™ Professional with Williams Financial Advisors, LLC. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through RFG Advisory Group, a registered investment advisor.  RFG Advisory Group, Williams Financial Advisors, LLC, and Peak Advisor Alliance are separate entities from LPL Financial. Branch office is located at 6425 Youree Drive, Suite 180, Shreveport, LA 71105.

 


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