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Kevin Hassett: Trump Tax Cut Is $4K-Year Pay Raise for Average Family


By    |   Tuesday, 30 January 2018 03:27 PM

A key Trump adviser says the president’s landmark income-tax cut will result in a $4,000-a-year pay raise for the average family.

About a third of corporate profits from the tax overhaul will eventually go to everyday workers, Trump adviser Kevin Hassett told CNBC.

Hassett also said he and President Trump were surprised at the speed of the announcements by U.S. companies about employees bonuses and wage increases.

"Now we've passed the bill, and now we're expecting in over three to five years, we'll see the $4,000," Hassett told CNBC.

Hassett, a former economist at the American Enterprise Institute and ex-senior economist at the Federal Reserve, sees some of the extra profits appearing in workers' paychecks by next January.

"Historically, if you look what happens when after-tax cash flow happens, ... then we see about a third of that going to workers," Hassett said. "It'll be interesting to come back at the end of the year, watch the wage increases that we've seen, watch the profit increases that we've seen after tax and compare the two."

To be sure, More than 260 companies have announced bonuses, wage hikes or 401(k) match increases as a result of Congress approving tax reform legislation, according to Americans for Tax Reform.

At least 3 million Americans are receiving special bonuses — and that does not include those getting pay raises or increased contributions to their 401(k).

The list of companies rewarding employees includes:

  • Iron Horse Energy Services of Eolia, Missouri. The company handed out bonuses to all 93 employees and is continuing to cover 100 percent of healthcare.
  • Advanced Science of Technologies, LLC of Berlin, New Jersey — Company officials are increasing their 401(k) match for employees.
  • Bank of America — $1,000 bonuses will be given to 145,000 U.S. employees.
  • Comerica Bank — $1,000 bonuses to 4,500 non-officer employees are being given out.

Americans for Tax Reform has compiled a full list of those companies getting special tax reform bonuses.

Meanwhile, U.S consumer confidence rebounded in January and house prices increased further in November, suggesting that a recent acceleration in consumer spending was likely to be sustained despite sluggish wage growth.

Robust consumer confidence and rising household wealth as a result of record gains on the U.S. stock market and rising house prices have left Americans less fearful about the future. That is encouraging some to dip into their savings to fund purchases, Reuters explained.

“More confident U.S. consumers point to stronger spending as the year begins,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

The Conference Board said its consumer confidence index increased 2.3 points to a reading of 125.4 this month.

But consumers were less upbeat in their assessment of current conditions. They were also ambivalent about their income prospects over the coming months, which the survey attributed to “some uncertainty regarding the impact of the tax plan.”

The Trump administration and the Republican-controlled U.S. Congress pushed through a $1.5 trillion tax cut package last month. While many Americans will see an increase in their paychecks, taxes will increase for some middle-income families.

The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, rose to a cycle high of 21.2 in January from 20.3 in December.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report and is consistent with further absorption of labor market slack. The labor market is near full employment, with the unemployment rate at a 17-year low of 4.1 percent.

(Newsmax wire services contributed to this report).

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Kevin Hassett: Trump Tax Cut Means $4,000-a-Year Pay Raise for Average Family
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Tuesday, 30 January 2018 03:27 PM
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