Much of the chatter about President Trump’s recent Tax Cuts and Jobs Act, has died away in major media sources. Nonetheless, accounting professionals and other financial gurus are still pouring over every detail of the new legislation, and are trying to figure out which key insights they need to be aware of the most.
Luckily for you, the recent tax reform law can be distilled down into 5 key points that can be easily understood. These are the ins and outs of the Tax Cuts and Jobs Act that every accountant needs to know in order to be effective in the workplace.
1. The reform led to more bonuses
It was of little surprise that many companies, big and small alike, decided to issue bonuses to many of their employees after the details of the Tax Cuts and Jobs Act were announced. What so few financial gurus expected, however, was the absurd amount of companies that started issuing huge bonuses to wide swathes of their employees. Literally hundreds of companies announced the rolling out of huge paybacks to their employees within days of the bill’s passage, and scores more followed in the ensuing months.
With all of that extra cash flowing into the pockets of employees, it’s safe to say accountants can look forward to some serious spending sprees in the near-future.
2. Some unexpected criticisms have surfaced about corporate cuts
The size of corporate tax cuts is always fiercely debated whenever tax reform is discussed, and this time was no different. The details of the Tax Cuts and Jobs Act made it clear early on that corporations in particular would be tremendously benefited by the reform, given that they saw their overall rate slashed down to 21 percent, but the massive windfall for major companies that eventually surfaced exceeded even many conservative expectations.
Perhaps that’s why leading conservative voices in the Senate like Marco Rubio have voiced extreme criticisms about the corporate tax cuts that resulted from the recent reform law. Accountants who are keeping their eye on future reform efforts may want to consider that contemporary backlash to excessive corporate cuts could lead to retaliatory higher rates in the future.
3. The reform likely led to a surge in Wall Street spending
While many accountants concede that tax reform can boost the spirits of investors across the market, many continue to doubt the Tax Cuts and Jobs Act’s impact on Wall Street, but it’s a simple matter of fact that the recent reform effort is likely responsible for the recent positive impact we’ve seen on spending intentions. Across the market, small households and wealthy stockbrokers alike are funneling more money into the market with gusto, and this spending spree shows few signs of slowing down.
With the IPO market currently roaring ahead at full speed, and stocks across the board regularly breaking records with their performances, it’s safe to say that the recent reform law can take some credit for the merry with which shareholders and consumers are spending their cash.
4. But consumer confidence may be lagging behind
While many of the recent tax reform’s proponents were quick to point out that the tax cuts most American households received would likely lead to a surge in consumer confidence, it’s unclear if that’s really going to play out across the market, especially if your company is invovled in office supplies Toronto. After all, while consumer confidence has been soaring to all-time highs recently, it took an unexpected dip in March after failing to meet expectations. Accountants and investors probably don’t want to put too many of their eggs in one basket by banking on higher consumer confidence and spending until more long term results can be pieced together.
After all, we’re only just seeing the early results of the tax reform, given that many businesses and everyday shoppers alike are only just finishing up their first set of taxes after the reform effort. As the market continues to churn forward, expect more concrete results to surface as it pertains to whether the Tax Cuts and Jobs Act actually emboldened normal shoppers.
5. Certain industries have been hit harder than others
Every tax reform initiative will inevitable generate some winners and losers, which is an unfortunate reality that many accountants have simply forced themselves to deal with. The recent Tax Cuts and Jobs Act is no different in that regard, given that it’s lifting restrictions on some industries more than others, and changing rules for certain professionals while leaving others unharmed.
For instance, few industries were hit with so many changes as the real estate business, which is currently swamped with figuring out the new tax scheme. Try as we might, it seems impossible to generate a serious tax reform effort without mucking up at least some aspects of the private sector.
Gary Eastwood is a CPA licensed senior accountant from Seattle, Washington. He received his CPA license from the Washington State Board of Accountancy in 2001 before relocating to Onawa, Iowa in 2008. Over more than 15 years of accounting experience, Gary has worked with multinational health service providers and independent CPA firms. He has a proven ability in dealing with business clients from a variety of backgrounds as well as leading companies to greater efficiency and profitability. He is familiar with both US GAAP and China GAAP.