Death And Taxes: Trump Announces Plan For Tax Overhaul
Shain Vernier • 2 min read
Since the election of Donald Trump as President of the United States, market sentiment towards U.S. equities has been overwhelmingly positive. Investors have fallen in love with the idea of a business-friendly POTUS. With the promise of a lower corporate tax structure and revitalized trade, U.S. equities have reached unprecedented heights.
Will The Trump Tax Plan Come To The Aid Of Mainstreet America?
So, what now? With a U.S. tax plan finally coming into focus, what will we see as 2017 comes to an end?
Trump’s Tax Plan
Wednesday brought an official announcement regarding President Trump’s tax plan. Here are the high points:
A reduction of personal tax brackets from seven to three. New rates are to be 12%, 25%, and 35%.
Doubling the standard deduction to $12,000 for individuals and $24,000 for married couples.
The Alternative minimum tax and estate tax are to be eliminated.
A reduction in the corporate tax rate from 35% to 20%.
A “pass-through” tax rate will be created at 25% for partnerships and sole proprietorships.
As no surprise, President Trump lauded the plan, calling it “the lowest top marginal income tax rate for small and midsize businesses in 80 years.”
To be honest, tax cuts are good for business. Their long-term utility is debatable, but more cash in the coughers typically means growth.
The Markets React
Yesterday turned out to be a banner day for U.S large caps as the S&P 500 posted all-time highs. Both the DJIA and NASDAQ closed in positive territory, with the USD continuing its recovery. So far today, the DJIA and S&P 500 are down moderately.
Overview: The big question surrounding these tax cuts is whether or not they will become a reality. President Trump is not the most popular guy in Washington D.C. Can he get the Congressional support necessary to pass this overhaul?
The short answer? Not this year. Perhaps in 2018, but so far Senate Republicans have shown dissent on nearly every issue. While tax cuts will most certainly bolster U.S. economic growth, equity indices, and the USD, we are unlikely to see that scenario play out in the markets. At least not yet.