President Donald Trump’s tax reform plan was described as the most sweeping modification to the American tax laws since the Ronald Reagan era. The new plan changed corporate tax rates significantly, altered personal tax rates modestly, and caused a stir nationally that divided interests throughout the country.
That’s not only the common opinion about the tax law. it is also the story from Spectrem’s new research on current events.
Politics, Taxes and Investors’ Changing Attitudes surveyed investors to discuss how they feel regarding the new tax laws, whether they think it will increase or decrease their personal tax return, and the appeal and effect of the new corporate tax rate from 35 percent to 21 percent. The study segmented the investors by age, wealth level, political affiliation and occupation to see just how the tax laws were appraised over a wide range of investor backgrounds.
“This sweeping tax reform will affect corporate returns and personal tax returns for years to come,’’ said Spectrem president George H. Walper Jr. “It is important to see how investors feel about the tax reform a few months in, so we can compare these reactions to those of investors a year from now.”
Starting at the beginning, 43 percent of all investors proffered positive support for the tax reform, with 22 percent offering significant support. Since the tax reform was proposed by a Republican president and passed by a Republican Congress, it makes sense that 73 percent of investors who consider themselves Republicans would state their support of the tax reform, while only 10 percent of Democratic investors did so. Support among occupations followed similar lines, with 47 percent of Senior Corporate Executives stating their support and only 31 percent of Educators doing so.
On the other end of the poll, 35 percent of investors expressed a negative feeling toward the new laws, including 17 percent who said they were “very negative”. Professionals (doctors, lawyers and accountants) and Educators had the highest percentage of negative opinions, and 40 percent of investors over the age of 71 viewed the changes negatively.
Support for the tax reform most often comes from those investors who believe the new tax laws will decrease their personal tax burden. Thirty-six percent of all investors expect their tax bill will decrease, while 28 percent believe their tax bill will increase.
Perhaps the most telling fact is that 18 percent of all investors say they do not know yet how the new tax laws will impact their personal tax bill.
There was an interesting result from the survey related to gender segmentation, as more females (32 percent) expect an increase in their tax bill while fewer females (28 percent) expect a decrease. It is also noteworthy that the wealthier the investor, the more they expect an increase in their taxes; 33 percent of those with a net worth above $5 million expect to pay more in taxes due to the change in tax laws.
Top Takeaways for Advisors
The far-reaching study shows that there is a wide variety of responses and expectations related to the new tax laws. Advisors would serve their clients well by understanding the implications for every investor and explaining not only how the tax laws will impact them but how they can take advantage of the new tax laws with a different layout of investable assets.
©2018 Spectrem Group