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Tax overhaul will have a limited effect on U.S. economy, Moody’s says

January 26
16:04 2018

The U.S. tax bill signed into law in December will have a limited effect on the U.S. economy, as companies are unlikely to spend their tax savings on growth initiatives while the tax cut for the wealthy will not trickle down.

That’s according to Moody’s Investors Service in a FAQ on the credit impact of the tax bill published Thursday, which warns of a number of negative consequences for federal debt, local governments, utilities and homeowners.

“We do not expect a meaningful boost to business investment because U.S. nonfinancial companies will likely prioritize share buybacks, M&A and paying down existing debt,” said Moody’s analysts led by Rebecca Karnovitz. “Much of the tax cut for individuals will go to high earners, who are less likely to spend it on current consumption.”

More than three-quarters of the $1.1 trillion in individual tax cuts will go to people who earn more than $200,000 a year in taxable income, who constitute only about 5% of all taxpayers, said Karnovitz.

Continue Reading at Market Watch

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