President Donald Trump sent his tax proposal to congress on Wednesday, calling for a 15% corporate tax rate as a starting point for negotiations. The market was flat-lined on the news, expecting more railroading from a Republican congress and the Democrats who see this as a tax break for the wealthy and large corporations.
Some highlights from the one-page memo:
- Reduction of the top marginal rate on personal income to 35% from 39.6%
- Simplifying the personal income tax rate to from seven to three brackets: 10%, 25% and 35%
- Repeal of the Alternative Minimum Tax and the estate tax
- Repeal of the 3.8% Obamacare tax, a surcharge applied to capital gains
- Transition to a territorial tax system, and
- A one-time repatriation tax.
Treasury Secretary Steve Mnuchin pressed for eliminating the Obamacare tax and Trump’s Chief Economic Adviser Gary Cohn said the administration was seeking the immediate phase out of the estate tax.
Earlier this week, House Speaker Paul Ryan indicated that House leadership agreed with about 80% of the White House tax plan. Yesterday, Joint Committee on Taxation Chief Thomas Barthold said that a 3-year reduction of the corporate tax rate to 20% would be akin to major deficit spending. The Committee suggested the Senate find revenue elsewhere if it hopes to produce lower corporate taxes of anything longer than two years.
The Trump Administration is breaking down some of the antipathy with Democrats, which could aid the legislative effort to reform the tax code in a best case scenario. On Tuesday, Trump’s 20% import tariff on Canadian softwood lumber actually met with the quick approval of Senator Minority Leader Chuck Schumer and Senate Finance Committee member Ron Wyden. Markets will wait to see if they can come together on taxes once the dust settles and the made-for-TV soundbyte rhetoric is over with.
For now, it will be all eyes on earning season as the Dow is expected to crack 21k again soon.
