With the 2017 tax return season set to end Tuesday, April 17, taxpayers can look ahead to next year when, thanks to federal tax reform, most Americans should have more money in their pockets.
How that extra cash will play in future years, for taxpayers and the economy in general, has at least one economist, Jeff Humphreys of the University of Georgia, crunching numbers.
“There’s been a constellation of events that have taken place in recent months that may or may not alter my forecast (through) 2020,” said Humphreys, director of the Simon S. Selig Jr. Center for Economic Growth.
He said he’s more optimistic about the economy through 2019 “than I was before the tax cut package passed and before all the trade war stuff started ... but I’m actually more concerned about 2020.”
That’s when Humphreys thinks the country could slide into recession.
“Here’s my thinking: We have a deficit-financed tax cut that’s going to provide a lot of economic stimulus,” he said. “A number of forces are going to come to bear on the economy in 2020. Certain imbalances will have developed, one of which is ... large budget deficits (funding the tax cuts) that’s going to put more pressure on interest rates and household (finances).”
A recent analysis by the Congressional Budget Office shows the combined effect of the tax cuts — being felt now by Americans through fatter paychecks — and President Donald Trump’s spending bill could send the federal deficit toward the $1 trillion mark next year.
Forecasting the economy is difficult, said Bob Willis, founder of Willis Investment Counsel in Gainesville.
“The forecasting record of economists, including the Federal Reserve, is not much better than 50/50,” he said. “The economy, inherently, by nature, is cyclical. It’s supply and demand and so forth.”
“What’s most worrisome about the economy right now is the Federal Reserve is in the middle of a grand experiment,” Willis said. “They are trying to figure out how to normalize interest rates after such a very long time of rates being near zero.”
Apart from the political and pundit chatter about stock market volatility and talks about tariffs and trade wars, North Georgia workers are seeing incomes rise through less federal taxes in their paychecks and, in some case, bonuses.
As part of the federal law, the tax rate for businesses was dropped to 21 percent from 35, prompting at least one Hall County company, Mincey Marble, to share the savings with employees through bonuses.
“I wanted to share this benefit ... in addition to investing back into our company,” Mincey President and CEO Donna Mincey has said.
Elsewhere, American Proteins is providing $1,000 in bonuses for 700 employees, according to CEO Tommy Bagwell. The Cumming-based poultry product recycling company has an office on Green Street in Gainesville.
In Toccoa, metal fabricator CMC of Georgia Inc. is giving bonuses of up to $1,000 to its employees, according to Toccoa radio station WNEG. Employees working a full year as of June 2017 were given $1,000, while employees with less than a year on the job received $500.
“As I consider business owners and the workers that make their Georgia operations a success, the chorus I hear is that tax reform has given companies the ability to hire more workers and provide them with more benefits,” U.S. Rep. Doug Collins, R-Gainesville, said in an email last week.
“Individual taxpayers are also seeing their tax burdens decrease in the new year, and I’m excited that this is the last time Northeast Georgians will have to file federal tax returns under such a broken, oppressive system.”
Collins went on to say, “Tax relief like this helps expand the economy, and we’re seeing that in action.”
“Tariffs are a bit different. While actual tariffs — which we haven’t seen much of yet — can affect markets in different ways, the threat of tariffs that the president is making can actually make markets more competitive.
“We always want to be careful to promote free markets, free trade and low taxes, and April 17 of this year reminds us that that plan is working.”
Also, Georgia passed a tax cuts law to head off an income tax windfall for state government generated by changes to federal tax law.
Juggling this year’s taxes and forecasting next year’s taxes has kept area accountants busy.
“It’s fleshing out a few things,” said Perry Barnett, certified public accountant and partner with Rushton in Gainesville.
“Personal exemptions are no longer deductible in 2018 and going forward, and a lot of people were depending on that. By the same token, their standard deduction is really increasing. (In looking ahead), some people are using that instead of itemizing.”
The Associated Press contributed to this report.