In the early hours of November 6, as the US presidential race was called for Donald Trump, many Americans made a prediction, some advisers say: a Trump victory means lower taxes are here to stay.
Over the past year, many Americans have been bracing for the expiration of the 2017 Tax Cuts and Jobs Act (TCJA), also known as the Trump tax cuts. TCJA was the largest overhaul of the tax code in thirty years. It included widespread tax cuts for businesses and individuals. Many of the benefits for individuals, including lower tax rates for almost all Americans, expire at the end of 2025.
With Trump returning to the White House with a majority in both chambers of Congress, advisers say the TCJA will likely be extended.
“There was a little bit of relief from our clients, especially those who didn’t necessarily want him to win or vote for him,” said Daniel Milan, managing partner at Cornerstone Financial Services in Southfield, Michigan. “It’s almost to make themselves feel better about losing (Vice President Kamala Harris). It’s self-soothing in a way.”
Potentially stronger investment portfolios and economy, at least in the short term: Americans have already seen their 401(k) and other stock market investments rise, partly on expectations that Trump will keep corporate tax rates low and possibly cut them even further, some say advisors said. The blue-chip Dow index and the broader S&P 500 index rose to record highs the day after the election and have remained strong.
“Companies that have postponed capital spending due to election and regulatory uncertainty may now be ready to put money to work,” global chief economist James Knightley and Dutch Bank ING wrote in a report.
That should bode well for corporate profits and economic growth, economists say.
Scott Anderson, the chief U.S. economist at BMO Economics, has raised his economic growth forecast for 2025 from 1.9% to about 2.2%. “Trump’s victory is likely to at least temporarily boost consumer and business confidence and stock market performance,” he said.
Lower tax rates. One of the most important changes for most Americans was lower income tax rates. The top rate fell from 39.6% to 37%, the 33% bracket fell to 32%, the 28% bracket fell to 24%, the 25% bracket fell to 22% and the 15% bracket fell to 12 %. The lowest bracket remained at 10% and the 35% tax bracket remained unchanged. If the income tax cuts are not extended, affected tax brackets will return to pre-TCJA levels.
With Trump’s victory, “there is renewed confidence that these tax cuts will be extended or become permanent tax cuts,” Milan said. “This is good news for our finances.”
