Market Commentary

The Federal Income Tax

A sweeping tax law change passed this week and it will have a major impact.

For those states that have high property values thus high mortgages or states that have high state income taxes the law will affect them the most. There is a cap on the mortgage interest rate deduction of debt up to $750,000 and state income tax at $10,000.

There is of course more to the tax change, but generally speaking it will reduce taxes for most people, but not for high-income earnings in states with a high state income tax rate, or mortgage holders over the $750,000 threshold.

The real benefit may be long term in reducing the corporate tax rate from 35% to 21%. That may attract more manufactures to locate in the U.S., but we won’t know that for years to come. Will the new law produce jobs? That is the goal but it is going to be difficult to measure. The odds are good that it will boost GDP growth and that is always good.

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