Tax Reform Changes Impacting Corporations
The Tax Cuts and Jobs Act is now law. This legislation is the largest and most significant change to the tax law in three decades and includes several significant changes to the taxation of corporations.
Corporate Tax Rate Significantly Reduced
The new legislation permanently reduces the corporate rate to 21% plus other key tax provisions.
Driven by President Trump’s policy to enact this bill in his campaign, the economy has seen tremendous growth this year. The S&P 500 Index has risen 20% since the beginning of the year and the Dow Jones Industrial Average is up 25%, stuffing portfolios and increasing dividends.
Firms investing for the future redirect these gains and savings back into the company or economy through capex, investing and R&D to sustain growth. Companies from AT&T Inc. and Comcast Corp. have already outlined to use these tax savings in investments to strengthen its workforce and promote growth.
What Does This Mean for Cryptocurrency?
The Tax Cuts and Jobs Act set the stage for business and economic developments. Investments and R&D focus are set to increase in the next few years, and with the recent addition of Bitcoin futures being added for investors, it is natural that tax savings will make its way into crypto.
This will be accelerated with the adding of Bitcoin ETFs and other cryptocurrencies that Wall Street may want to get its hands on.
Along with investments is the growth of research and development. An increase in a company’s R&D budget will undoubtedly include blockchain technology. With companies such as IBM, JPMorgan Chase, and Deloitte, already investing in their own alternative blockchain, competitors will want to get their hands on this disruptive tech as well.
No Longer an Investment During Global Uncertainty
Historically gold has always been the perennial safe haven asset during uncertainty.
In September of 2017, the Dow Jones dropped 234 over tensions between North Korea who had just detonate a nuclear test. While the U.S. equity markets took a beating, gold futures soared 160%, the highest it had been all year.
Bitcoin and other cryptocurrencies were always thought as the alternative or digital version of gold. The consensus was always been that times of uncertainty, cryptocurrency will soar similar to gold.
But this is no longer the case. While gold is a physical asset and has the protection of never becoming a worthless asset, cryptocurrencies are an asset of a highly speculative technology with room to grow. In a lucrative stock market, expect equity gains to flow through to cryptocurrency markets.
The corporate tax provisions in the new law will impact every corporate from a taxability standpoint. Fueled by the U.S. economy to once again break above its long-term potential growth, expect companies to have extra cash to spend. That cash will be used to grow future investments which will include Bitcoin and other cryptocurrencies. And to increase R&D spending which will include blockchain development.