A bill to reform the US tax system, signed in December, will have a limited impact on the country's economy, as companies will not spend their savings on growth initiatives.
The Moody's agency warns that tax cuts for the wealthy will not lead to a redistribution of wealth, and the bill will lead to a number of negative consequences for government debt, local governments, utilities, and homeowners.
"We do not expect a significant increase in business investment, since non-financial companies in the United States are likely to give priority to the repurchase of shares, the mergers and acquisitions and repayments of existing debt," said Moody's analysts led by Rebecca Karnowitz.
At the same time, most of the tax cuts for individuals will go to high-ranking individuals who are less likely to spend them on current consumption, according to the agency’s documents.
More than three quarters of the $ 1.1 trillion in the form of individual tax benefits will fall on people who earn more than $ 200 thousand a year, they make up about 5% of all taxpayers, Karnowitz noted.
The tax bill will significantly reduce federal government tax consumption over the next 10 years by 1% of GDP on average, according to Moody's estimates.
According to Karnowitz, as a result of the adoption of legislation, Moody's expects federal debt to build up at a faster pace.
Large deficits and higher borrowing needs will come when the Federal Reserve System (FRS) begins to normalize interest rates after the long period of ultra-low rates that followed the 2008 financial crisis.
“This will increase the effective cost of debt for the government faster than we expected before,” Karnowitz said.
At the levels of state and local government, this will lead to increased political resistance to tax increases, as taxpayers lose their state and local tax deduction, known as SALT.
This means that it will be more difficult for state and local governments in high tax areas to pay for services.