Republicans in the House are the biggest hurdle to quick passage of tax cuts. Speaker Paul Ryan and some ranking members of the Ways & Means Committee keep pushing for a total rewrite of the tax code, and are pushing or a border adjustment tax that would tax imports at 20%, exempt all exports from taxes, and tax businesses 20% on their cashflow.
The plan is very unpopular with retailers, with the SPDR Retail ([stock_quote symbol=”XRT” show=”symbol”]) ETF down around 1% this year, underperforming the S&P 500, but still better than the SPDR Energy ([stock_quote symbol=”XLE” show=”symbol”]) ETF which continues to get soaked from low oil prices and high debt loads in the sector.
The current plan for a border tax and full-on tax reform, “has no hope of passing outside of reconciliation and it appears to be a nonstarter in the Senate,” says Vladimir Signorelli, head of Bretton Woods Research, a boutique, big picture investment research firm out of New Jersey.
House leadership, along with like-minded think tanks, such as the Tax Foundation, dispute Trump’s idea that reducing the corporate tax rate is pro-growth.
“They hope such arguments will bring favorable attention back to their plan for a border-adjusted tax. It won’t,” Signorelli says. “When Congress returns from recess on May 15, we would not be surprised to see House leadership recognize the impasse with their plan and move in line with Trump,” he hopes.