Tax Cut Odds Better with Trump Troubles

Published on: 23 Aug, 2017

Chances of tax legislation seem better with increasing dysfunction and turmoil in Washington. Wall Street at least believe so. For Trump, the second week of August was a horrible period. President Donald J. Trump came under a barrage of criticism for his response to the Charlottesville, Virginia crisis. A number of corporate CEOs quit their positions from his advisory panel. Speculation is presently rife about a number of Cabinet members and aides leaving the President.

For the GOP, the threat is disturbingly real. A report published by Strategas Research noted that if an election is held at present, the Senate and possibly even the House GOP could lose their majority. A note published by the firm pointed out that the Republicans will seek legislative accomplishments. The latter goes against any consensus that President Trump's troubles may go against the tax reform.

According to a number of Wall Street strategists, a silver lining exists in this chaos. The plus point being individual tax and corporate tax legislation. One of Trump's principal policy agenda was the tax code overhaul. It was also an important aim for the Congressional Republicans. However, any dreams of sweeping tax plans have been dashed for good. This has been articulated by Tobias Levkovich of Citigroup Inc (NYSE: C). The chief equity strategist at his company said that tax cuts will happen, but tax reforms have been given a near burial.

Levkovich said the rate cut might end up at 25 percent, and not between 15 percent and 20 percent as previously envisaged by Trump and the House GOP. The present tax rate is 35 percent, although most Standard & Poor 500 companies pay a little more, coming to 27 percent. Even then, a tax cut will be a feather in the GOP hat. If this happens, there will be no need to find any kind of agreement on the controversial revenue generating plans, like border adjustment tax. The Republicans will be loath to eliminate a number of popular deductions like local property and state property taxes, mortgage interest, and charitable giving.

 Congress Republicans, even if entrusted with the hard task of consenting on budget and the raising of the debt ceiling in September, are much more probable to push the tax reform agreement. The present grim mood of the Congress is in sharp contrast with the initial months of the Trump administration.


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Danny Abramov



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