28 Feb 2018
Taxation: Game Changer
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
Growth asset prices (both property and shares) are stretched and defensive asset prices (bonds) are also stretched when compared to their long term mean or average.
Question, could this bull market in the United States (third longest in history) go longer?
Answer, yes given that on 22nd December 2017 the United States signed into law the reduction of the corporate tax rate from 35% to 21%.
This is big.
This is a 40% reduction on the amount of tax that a business currently pays the Internal Revenue Service.
This is extremely good for companies that generate most of their income in the United States and for non-US companies with significant earning in the United States.
It permanently raises after-tax earnings and cash flow which is likely to result in more capital investment and increased dividends to investors.
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This could end up being the key game changer that keeps the current bull market in the United States going longer and asset prices stretching further.
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