According to a report conducted by the International Monetary Fund, the economy of the United States is projected to expand 2.7 percent in 2018 thanks to the Republican tax bill. The tax reform was signed into law by President Trump at the end of last year, cutting corporate taxes in an effort to boost US growth. It is the largest overhaul of the US tax code in over three decades. However, the IMF believes that this increase is just a temporary symptom of the bill and will not last long.
“There are still too many people who are left out of that recovery and acceleration,” said Christine Lagarde, head of the IMF on Monday.
Before the Republican tax bill was passed, the IMF estimated that the US economy would grow by 2.3 percent. The reform slashed the corporation tax rate from 35 percent tohttps://www.flickr.com/photos/gopleader/4056192500 21 percent, which would stimulate business investment and growth, according to the IMF. America as a whole is poised to benefit from the tax bill, as it will increase trade and purchases of US products. According to the report, an estimated 120 countries have recovered economically in 2017. This simultaneous global surge was last reported in 2010.
American banking conglomerate, Well Fargo, echo IMF’s positive forecast by predicting a 3 percent growth this year.
IMF, however, warns that the surge will be temporary. The World Economic Forum organization states that the growth alone will not solve the inequality issue. According to a recent report by the charity organization Oxfam, 42 billionaires amassed 82 percent of the world’s wealth in 2017. More so, middle-class incomes have not registered any change for twenty years.
IMF foresees the tax bill to boost the US economy for only two years. The surge will then disappear due to an increased budget deficit and the government will have to deal with spending reductions or raising more revenue.
Image Source: Flickr