Trump’s Economic Policies and HOW They Will Impact Latinos
Following the election of Donald Trump, it really feels like we are entering a new realm in terms of foreign, domestic, and economic policy.
Every one of these new policy decisions will impact you in one way or another, but here at Super Monedero we like to focus on the economic, financial, and tax issues which matter to you most.
In this article, we will explore three of the biggest economic policy moves expected from the Trump White House and share how we expect these moves to impact Latinos across the United States.
Taxes are one of the biggest items that the President can influence from an economic perspective. By raising or lowering taxes, a President – with help from Congress – can change how much of our paycheck goes to the federal government each year.
Donald Trump harnessed the American thirst for lower taxes on the campaign trail, and made tax reform a major tenet of his pitch to Americans during the election. Shortly after winning the Presidency, he made it clear that he was serious about achieving a lower and more simple tax code for all Americans and especially the middle class.
“We’re going to massively lower taxes on the middle class, reduce taxes on American businesses and make our tax code more simple,” Trump told the Conservative Political Action Conference in February of 2017.
So, what does all of this mean for you, your family, or your business? Here are three situations which most people think will come from a Trump tax change.
The current tax code has seven levels of taxes based on how much you or your family earn each year. These “levels” are called tax brackets, and President Trump would like to reduce the current seven tax brackets to just three. In this way, his proposal should simplify the process of filing your taxes each year.
The average Latino family makes $48,400 each year, and in October of 2016 the Tax Policy Center estimated that families making this amount each year would be required to pay just 12% in federal income taxes after a Trump tax change. This is 3% lower than the current rate of 15% for a family earning $48,400 in 2016. This 3% lower tax bracket would mean that the average Latino family will save $1,452 each year on their tax bill.
President Trump has proposed to reduce the corporate tax rate from 35% to just 15%. If you work for a corporation it is likely that your company will have more money left over after paying taxes to invest in the business, hire new staff, and pay existing employees more. This reduction in the corporate tax rate should also benefit your retirement portfolio, as corporate after-tax earnings are a major driver of stock prices.
One of the tenets of Donald Trump’s presidential campaign was his desire to strengthen the United States from a trade perspective. In his view, the United States has taken an unfavorable position when it comes to trade deals with global superpowers like China and through the North American Free Trade Agreement (NAFTA).
Donald Trump, and many Republicans, are of the mindset that these free trade deals are inherently bad for the United States. “Free trade” is economic jargon which describes trade between countries which is uninterrupted by tariffs (import taxes), quotas (limits on imports), or other types of restrictions.
On the contrary, President Trump would like to see trade policies which make it harder for foreign goods and services to compete with U.S. made goods and services. One way he could accomplish this is by raising tariffs or implementing new quotas on imports coming from China or Mexico.
Here are two of the biggest ways that you would be impacted.
The costs of imported goods and services are likely to go up. This is because higher tariffs make it more expensive for foreign companies to sell goods in the United States. Many times, these foreign companies will pass along additional trades costs to the end consumer. If you bought a Sony TV last year from Japan, that end consumer was you.
If the United States raises tariffs on Chinese imports, China is likely to raise tariffs on imports coming from the U.S. in return. This would have very negative impacts for states like Washington, Oregon, and California which rely heavily on trade with China. Just take California for example, which sells roughly $16 billion worth of goods and services to China every year. 1 If you work for a company that sells goods and services to China, and China slows down their purchasing because of higher import tariffs, your company could be negatively impacted.
This immigration policy, passed by President Obama in June of 2012, allowed individuals who entered the United States Illegally as children to remain in the United States and receive work permits. These work permits are valid for two years and can be renewed assuming the permit holder does not encounter any legal trouble.
It is important to note that DACA is not technically economic policy – it is immigration policy. However, President Trump has aggressively pushed to repeal DACA using an economic argument, saying that the program is hurting employment opportunities for U.S. citizens. On the contrary, the majority of economists argue that DACA either has no meaningful impact on U.S. citizen employment or is actually helping the economy.
How is it helping the economy? The U.S. economy is at “full employment”, meaning that unemployment is not a significant problem. To highlight this, consider the fact that there are more job openings today than at any point in our nation’s history. 2
Regardless of the economics, it looks like DACA will be changed in some capacity over the next year. Here are two ways that a removal of DACA would impact Latinos living in the United States.
Obviously, the biggest impact will be for Latinos currently enrolled in the program. If the program is completely dismantled, it will mean that these individuals will need to return to their home countries or face the threat of deportation.
If you currently employ individuals within the DACA program, this means that it may be difficult to find new employees to fill positions left by DACA members which have left the country. As we mentioned, the U.S. economy is currently at “full employment”, meaning that there are plenty of jobs available and employers will need to compete aggressively for skilled labor.
We don’t know exactly how the next four years will look, but it is very likely that the economic policies from the Clinton, Bush, and Obama administration will be in for a change. Here at Super Monedero, we will be with you every step of the way to explain how these policies will impact your financial future.