Fears over Rising U.S. Wealth Inequality Take Shine off Tax Bill

Investing.com - Even as Wall Street indexes rose to record highs on Monday in response to the passage of the Senate tax bill many analysts were expressing doubts that the tax overhaul will transform an economy that is already running close to full employment.Once the Senate and House of Representatives reconcile their two versions of the legislation, the resulting bill could cut corporate tax rates to 20% from 35%.Despite the cut to the corporate tax rate, economists at Goldman Sachs (NYSE:GS) have only lifted their growth estimate for 2018 and 2019 by 0.3%.The bill could also propel the U.S. back to trillion-dollar deficits as soon as 2019, with the government becoming more dependent on debt due to reduced tax income.A $1 trillion budget shortfall could prompt some lawmakers to argue for cuts to social spending, which could hurt those who are badly off.What’s more, analysis of the bill has indicated that the benefits would be skewed towards the wealthiest Americans.Federal Reserve Chair Janet Yellen has described rising inequality as “disturbing” and suggested that if income is being shifted towards wealthier groups it could lower overall spending growth.