Larry Kudlow, the Reagan administration economist who also advised the Trump campaign, said an investment boom is coming to the U.S. as tax reform provides more incentives for companies to spend more on factories and equipment.
“The tax cost of capital is coming way down,” he said on business news channel CNBC. “A lot of these calculations and break-even’s and so forth look a lot better now if you’re talking about a 21 percent corporate tax rate and the 100 percent expensing. We’re on the front end of an investment boom.”
The tax plan approved last month by President Donald Trump cut the corporate tax rate to 21 percent from 35 percent, and allows businesses to deduct the cost of any assets they acquire right away.
As for personal income taxes, the IRS is currently revising its tax withholding tables and plans to release them by the end of this month. By February, many workers should start seeing more take-home pay.
“As those tax cut eggs fertilize, you’ll see more in February when withholding rates come down,” Kudlow said.
The Trump administration’s next challenges will include immigration reform, infrastructure spending and changes to trade policy, he said.
“The agenda looking ahead is going to be very cluttered and very contentious,” he said.
Trump ended the Deferred Action for Childhood Arrivals that shielded from deportation thousands of immigrants brought illegally to the country as children. But he delayed the implementation of his directive to give Congress more time to develop a legislative alternative.
Trump tweeted Tuesday that Democrats are missing a chance to overhaul immigration policy.
“Democrats are doing nothing for DACA - just interested in politics. DACA activists and Hispanics will go hard against Dems, will start 'falling in love' with Republicans and their President! We are about RESULTS,” Trump wrote.
Kudlow says immigration reform likely will include construction of a wall along the U.S.’s southern border with Mexico.
“Trump doesn’t want to deport these young people. But he wants tougher immigration laws for legal immigrants – the merit system, not the family change system,” Kudlow said. “He wants his wall or his fence, and so forth. He’s going to need money to get that done with drones. He’s not going to give up the DACA thing without getting nothing in return.”
During the campaign, Trump talked about spending $1 trillion on improvements to U.S. infrastructure, including roads, bridges and airports. Kudlow says the Trump plan likely would include partnerships between the government and private investors.
“The president has indicated a trillion-dollar infrastructure plan, but he doesn’t want Uncle Sam to pay for it and run it,” Kudlow said. “His vision is maybe $200 billion from Uncle Sam and the other $800 billion comes from private companies.”
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