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December 18, 2017

Tax Reform 2017 has not crossed the goal line yet, but after Friday’s (12/15/17) release by the Conference Committee of its 503-page document, it likely is in the “red zone.”  Highlights from the final tax bill include: a top individual tax rate of 37%, down from 39.6% today; a near doubling of the standard deduction, up to $24,000 for married filers; the deductibility of new mortgage interest expense is limited to combined debt of no more than $750,000 on a first and second home; a $10,000 limit on the deduction of state and local taxes, applicable to both individuals and married filers; a doubling of the amount that can be passed estate tax free to $11.2 million per decedent; a top corporate tax rate of 21% effective in 2018, down from 35% today (source: BTN Research).

The bill’s release included an estimate from the Joint Committee on Taxation that the new law would add $1.456 trillion to our nation’s deficit over the next decade, just inside the $1.5 trillion ceiling imposed by Congress in October.  The full Senate is expected to vote first on the final bill on Tuesday (12/19/17), followed hours later by the House vote.  Barring a last minute roadblock that could occur, President Donald Trump would sign the legislation on Wednesday, just 5 days before Christmas (source: BTN Research).

Janet Yellen’s 4-year term as Fed Chair has just 1 meeting remaining following last week’s conference that resulted in the 3rd rate hike of 2017 and 5th such bump since the Fed began tightening 2 years ago.  Post meeting notes forecast 3 more 0.25% rate hikes in 2018.  Since the first rate increase took place in December 2015, the S&P 500 index has gained +34.6% on a total return basis (source: BTN Research).

Notable Numbers

TAKES TIME – From President Ronald Reagan’s State of the Union challenge on 1/25/84 “to simplify the entire tax code so all taxpayers are treated more fairly,” it took 2 ¾ years until the Tax Reform Act of 1986 was signed into law by Reagan on 10/22/86 (source: New York Times).  2/13/17

A LOT IN A FEW – Of the 524 bank failures that have occurred in the USA during the 10 years ending 6/30/17, more than half (51%) have occurred in the 4 states of Georgia, Florida, Illinois and California.  9 US states had zero bank failures in the last 10 years (source: FDIC).  8/07/17

GROWING – The US economy has been growing for the last 99 months (i.e., no recession), an expansion exceeded in length only 2 times since 1900 (source: National Bureau of Economic Research).  10/16/17

SHIFT IN TYPE – In 1975, defined contribution plans outnumbered defined benefit plans 2-to-1, i.e., 207,700 to 103,300.  40 years later in 2015, defined contribution plans outnumbered defined benefit plans 14-to-1, i.e., 648,300 to 45,600 (source: Government Accountability Office).  10/30/17

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