Here's a real shocker… The House and Senate proposed their versions of tax reform as a "middle-class miracle." This is the same proposal that's nothing more than tax cuts for corporations whose massive savings are supposed to trickle down to benefit the middle class and all Americans.
That would be a real miracle. But it's not going to happen.
Corporations aren't going to spend their tax cut windfalls hiring more workers or raising wages or on massive capital improvements.
They're going to spend their billions on buying back their own shares, on special dividends, on technology to reduce human labor and liabilities, on mergers and acquisitions, and on more technology to cut more costs as they expand.
There's only one way to turn unfair tax cuts into a personal miracle.
Here's the truth about this tax reform miracle and how to play the continuing market melt-up…
There's a Miracle, but It's Not for the Middle Class
The middle class, depending on how they're defined, won't benefit from "tax reform." There isn't any. Instead, they're supposed to get their miracle via marginally lower tax bracket threshold levels, whether they remain at seven levels or are reduced to four.
Forget the "filing on a postcard" nonsense that would have necessitated real, extensive, and honest tax reform.
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So-called middle-class tax cuts have already been spent on rising healthcare costs and increasing insurance premiums. And the middle class has more increases to look forward to if the Senate's version of tax reform wins out and the ACA's individual mandate is repealed (it mandates individuals get insurance or pay a penalty).
Sure, not having to pay a penalty can be considered a savings, if you don't get insurance. And the government not having to subsidize insured policyholders who can't afford it would "save" $338 billion over 10 years, according to the Congressional Budget Office. Those cuts help offset lost revenue from tax cuts for corporations, by the way. Then, if more Americans opt out of insurance plans, the cost for remaining families and individuals goes up.
So much for that miracle.
Tax cuts for the middle class will be negatively offset by the potential elimination of deductibility of student loan interest and state and local taxes, which are a big deal to middle-income families living where the good jobs are in high-tax cities and states, along with other negative impacts.
So, what would people actually save?
According to The New York Times (not my favorite source, but a credible analysis nonetheless), "People across income brackets would see savings from the Senate plan in 2018. But for many in the middle class, the savings would be relatively small."
Those savings by income bracket are…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of 10X Trader, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade.
Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps.
Shah is a frequent guest on CNBC, Forbes, and Marketwatch, and you can catch him every week on Fox Business's "Varney & Co."
He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.