GASBARRE  pRODUCTS  nEWSLETTER -   January 2018

On Friday, December 22, 2017, President Trump signed the first major tax overhaul in over thirty years. This article summarizes four key benefits that PM parts producers will likely realize in the coming months and years to come.

 

Benefit 1 - Corporate Rate Cut

The corporate tax rate cut from 35% to 21% is Washington’s attempt to make the US a place for larger corporations to succeed and to domesticate significant corporate reserves held overseas.

 

Why it’s a Good Thing for PM Parts Producers

Though this was the marquee tax change, the immediate benefit to domestic US parts producers is limited.  More likely, parts producers will benefit in the long-term from increased consumer consumption in key end-use markets. This consumption is forecast to spur job growth and reinvestment as a result. 

 

Benefit 2 - 100% First-Year Depreciation

The plan expands bonus depreciation to 100% for property acquired after September 27, 2017 and placed in service before December 31, 2022.

 

Why it’s a Good Thing for PM Parts Producers

Manufacturers can more quickly capture tax advantages of equipment and plant expansion, making investment in their business less expensive.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit 3- “Pass-Through” Rate Cut

Pass-through companies account for about 95 percent of U.S businesses – sole proprietorships, partnerships and S corporations are all examples of pass-through businesses. Many US PM parts manufacturers fall into this category as S Corporations.  The change is a 20% tax deduction for all pass-through businesses.

 

Why it’s a Good Thing for PM Parts Producers

The hope is that this deduction will provide small businesses with some financial breathing room, allowing owners to reinvest saved money back into their business by buying new equipment, hiring new workers and/or expanding operations.

 

Benefit 4 - Individual Rate Cuts

There are still seven federal income tax brackets — but at slightly lower rates and adjusted income ranges.  About 70% of Americans will see their paychecks increase — albeit slightly.

 

Why it’s a Good Thing for PM Parts Producers
Slightly or not, increased disposable income will result in increased spending by consumers, resulting in a virtuous cycle of increased spending and increased business activity that will benefit the PM industry.

 

 

 

 

 

 

 

 

 

 

 

Summary

One concern even tax-cut enthusiasts have is that for ten years the Federal Reserve has kept interest rates low to encourage businesses to borrow money and spur economic growth. With reduced taxes the Federal Reserve could raise interest rates and try to offload some assets that it has accrued.  This, along with any number of uncontrollable circumstances both at home and abroad, could temper business investment somewhat.  However, in military terms, the “battlefield” has been prepared for a return to more robust economic expansion that will have broad-based benefits to PM parts producers.

Tax Reform: Four Key Benefits for Parts Producers 

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