In an interview with CNBC, Beijing time Friday (December 22), Michelle Meyer, chief economist of Bank of America Merrill Lynch, said that the reform of the U.S. tax system should boost the U.S. economy in the coming years , But long-term effects are still questionable.
The core points:
The Republican tax bill passed by both houses of Congress is currently awaiting the signing of President Trump. The act drastically reduced the corporate tax rate from 35% to 21%.
Tax cuts will increase by about 0.3 percentage points every two years in the future.
However, the biggest issue is whether tax cuts can stimulate long-term economic growth.
We are very suspicious of this. Do you really see the economic transformation let us out of the slowly growing environment? I do not think that the current legislation will allow us to achieve this goal.
First, an individual tax deduction is not the only change. It is only temporary. The clause that allows companies to charge for new investment projects will be phased out after five years, which will result in a higher effective tax rate for the enterprise.
But Republicans touted their plans for tax reform as a way to stimulate the economy. They said it will drive business investment, hiring and salary increases.