The U.S. Senate has decided tax reform of Government of President Donald Trump: On night of Wednesday he approved by a narrow majority of 51 to 48 votes draft. Now House of Representatives has to decide on final version of law, but its approval is almost certain. As final step in legislative process, Trump will sign reform. This is supposed to happen before Christmas.

What did Congress decide?

It has been most extensive change in tax laws for 30 years. The core of reform: income tax for companies will drop from 35 to 21 percent. In addition, US citizens will benefit in all income categories. From next year, you will have to pay less money from your salary to Treasury. The reform also abolishes an essential part of Obama's health reform: now re will be no more criminal taxes for citizens without health insurance. Accordingly, aim of Obamacare to create a generally binding health insurance policy is now being challenged.

What are consequences of reform for public debt?

Tax relief for citizens and businesses initially means less revenue for state. Overall, reform includes an estimated 1.5 trillion US dollar easing that will be absent from US budget. It is expected that national debt will rise sharply. But Republicans in particular argue that problem will not be so great. Finally, tax concessions will benefit economy – and a rising economic situation would in turn result in increasing tax revenues. This would also create jobs, which would benefit state in turn. Economists from camp of Democrats, however, are skeptical. You cannot imagine that economic upturn is so great that it could cushion missing 1.5 trillion dollars in US budget.

Who benefits, who does not?

On paper, reform initially benefits almost all taxpayers, because re will be relief in all income classes. The Republican camp was accordingly euphoric: "Today we are giving back ir money to people of this country," said majority leader Paul Ryan. Neverless, many economists believe that already immense gap between lower income levels and super-rich will increase again. For example, Thinktank Tax Policy Center has calculated that, in long term, tax burden remains unchanged for 45 percent of low-income citizens. On or hand, taxpayers with highest income benefited above all.

But even if a low earner now gets more net of gross, he could become loser of reform. For State must reduce its expenditure in order not to finance less revenue completely with debt. And re will be cutbacks – in case of a Republican government – especially in terms of social benefits. This could include government housing programs, support for veterans or state health insurance for poor, children, seniors and handicapped. Moreover, Robert Reich, Democrat and Labor minister in Clinton administration, points to anor problem: a bloated national debt could lead to interest rates rising. In United States, a large number of households are indebted, rising interest rates could bring m to survival.

What is impact of reform on global economy?

The tax reform will also be beargwöhnt internationally. Many states fear that drastic reduction in corporate taxes in United States will lead to reorganisation of elsewhere. This could result in a dumping competition for lowest tax rate.

On anor point, US government has responded to criticism from abroad. Previously, four EU states, among m Germany, had sent a letter to US government to warn of effects of reform – an unusual step, because normally one does not interfere in tax law of or countries. In original draft, re should be criminal tax for companies that obtain services from foreign branches. This would have affected mainly European companies with us works. But at last moment, this penal tax was deleted from bill. The German government was thus relieved: "It is good news for us that it looks as if Excise tax is no longer part of business," said a spokeswoman for Ministry of Economic Affairs.

How important is reform for Trump?

Immensely important. Since taking office at beginning of year, US president has barely been able to deliver a larger election promise. The attempt to abolish health reform of his predecessor, Barack Obama, has failed. The ban on entry of people from Muslim countries could only be enforced after a laborious procedure in a defused form against resistance of judiciary. Moreover, it is not possible to see when construction of wall to Mexico can begin. Thus, tax reform is a very important prestige project for Trump government. Now he can present tax concessions he has announced as a Christmas present to US citizens.

US tax reform-new vote needed in House of Representatives after US House of Representatives has already passed tax reform of President Donald Trump, board has to vote again on bill. The Democrats had brought procedural objections to Senate. © Photo: Aaron Bernstein/Reuters Date Of Update: 21 December 2017, 12:02