US President Donald Trump has enjoyed his first legislative success as his tax reform is passed, but it remains unpopular. The Tradefair team brings you the latest in US politics...
"Right now, unless they have somebody that we don’t know about, right now we’re unbeatable. We’re unbeatable."
- Donald Trump, US President.
Donald Trump has enjoyed his first legislative victory since entering the Oval Office, as his package of tax reforms is passed by the Senate.
Calling his own party of Republicans "unbeatable", the US President claimed the changes were exactly what America needed and hailed them as "the largest tax cut in the history of our country".
However, many are concerned that the reforms will only benefit the country's wealthiest and leave many minority groups vulnerable. It's also estimated that the tax breaks, which are mainly in corporation tax, will add $1 trillion to the national debt over the next ten years.
Tremendous tax reform?
Seemingly unaware of the worries that people have about his changes, the President praised the Senate for passing the "tremendous tax reform" in a 51-49 pre-dawn vote.
There are a few differences between the ones the Senate approved and the reforms the House put forward, but there are enough broad themes shared between the two to allow it to reach the next stage.
It will now progress to the temporarily-appointed House-Senate committee, who will look to resolve any differences between the House bill and the one the Senate has passed. The reforms will then need to be signed off by President Trump himself, who will surely be keen to get his first major win made official.
When leaving the White House to announce the news, Trump hailed the vote as a demonstration of the strength of the Republicans.
Are the Republicans unbeatable?
"Right now, unless they have somebody that we don't know about, right now we're unbeatable. We're unbeatable," Trump said. "And one of the reasons is what's happening with the markets, what's happening with business, what's happening with jobs."
The nod from the Senate means the bill is likely to become law by Christmas, even with the various distractions hanging over the President.
Both the Russian probe and Trump's latest controversial move to recognise Jerusalem as Israel's capital have diverted attention away from the tax reforms the President is looking to pass.
A look at the markets
However, the markets and investors are likely to be more concerned with the changes to the tax system and how it will impact the US economy. But the President has been praising the initial positive impact the tax cuts have had on the financial markets.
Tax reform is probably the most important of Trump's campaign promises as it should have the largest impact on the overall economy and the stock market. The Dow 30 and S&P 500 started off strong on Monday (December 4) after the US Senate passed the tax reform early Saturday morning.
However, the Dow gave up over 80% of its initial success and the S&P 500 eventually lost even more than it initially gained.
For Trump's supporters, the reforms will simplify an overly-complicated tax system, making it easier for everyone. Even the cut of corporation tax from 35% to 20% makes economical sense and could make the country more competitive for businesses.
Until now, the US had among the highest corporation tax rates in the developed world. This could deter many from investing in the States, especially when the tax system also offered a 0% tax on profits of companies that make their profits abroad.
Many have argued that this favours bigger and more sophisticated companies that have the expertise to navigate their way around the tax system and avoid paying any contributions at all.
But experts have been concerned that any benefits people may enjoy in the short term won't be balanced out over the next ten years.
Analysis from the Urban Institute and Brookings Institution's Tax Policy Center, published by the Business Insider, found that 28% of Americans would see an increase in their tax burden due to tax-code overhaul by 2027.
"Overall, the tax cut would be smaller in 2027, because of the expiration of certain provisions in 2023 (including the new $300 family credit and 100% bonus depreciation), the effect of indexing tax parameters to a slower-growing measure of inflation, and the substitution of a child credit that is not indexed for inflation for personal exemptions that are indexed," the report said.
Despite all income groups paying less in the short term under the new tax system, there would be a 12% increase in the overall tax burden for the US population in 2018.
Public opinion isn't convinced
Public opinion polls show that many remain unconvinced by Trump's overhaul. Although some surveys are indicating that people may slowly be changing their minds about the bill, it remains deeply unpopular for many Americans.
"I view it more than anything else as it's a tremendous bill for jobs and for the middle class," the President told reporters at the White House earlier this week. "And I think people see that and they're seeing it more and more, and the more they learn about it, the more popular it becomes. And I think the end result will be even better."
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