Could Your 401K Get Hit With a Trump Tax?
When Donald Trump campaigned for president, a staple of his platform was corporate tax reform. Since then, he's doubled down, suggesting that corporate taxes could be simplified and the rate reduced from the statutory 35% rate to as low as 15%. What he didn't say is that lower corporate taxes could be paid for with higher taxes through changes to 401Ks.
In truth, the American corporate tax rate of 35% is one of the highest in the world. It is the reason why so many American companies strive to generate a profit overseas, rather than in domestic operating units. Once earned, the cash tends to stay overseas, as cash-rich and highly profitable companies like Apple find it preferable to simply borrow money at low rates domestically than to pay taxes on cash to bring it back to American shores.
But many companies simply lack the capacity to avoid American corporate taxes by shifting profits overseas. Smaller, purely American companies, like those in small cap indexes, tend not to have far-flung global operations, and thus pay full freight on their purely American profits.
Source: Fool.com