Wall Street No Longer So Confident About Trump Tax Cuts

Wall Street, it seems, is no longer all that confident about tax cuts in the US. This follows President Donald Trump’s massive self-goal at replacing Obamacare.

The President’s plans for healthcare reforms failed spectacularly. This has led many market observers to conclude that they would be better off buying low priced stocks abroad. There is a feeling that we are headed for a few disappointing months as far as the US stock markets are concerned. The so-called “Trump Rally” may well be a thing of the past by the time you read this.

Still, the White House hasn’t given up hope for an overhaul of the entire tax code in the country. The Republicans are deeply divided, having failed to dismantle the much hated Obamacare.

President Trump made tax cuts the cornerstone of his economic policy during his campaign. That led to big hopes from the business class and investors who thought that the passage of the tax bill was a done deal.

Now, though, it doesn’t look so easy. Tracey McNaughton of the UBS is one of the more optimistic financial analysts. She says, “Currently the tax rate in the US for corporate is 35 percent, President Trump wants to take it to 15, the republicans want to take down to 20.”

“Even if we get a conservative 25 per cent corporate tax cut that’s still going to be significant earnings per share in the United States. A back of the envelope calculation; for every one per cent cut in the corporate tax rate, add about $1.30 to the earnings per share,” Ms. McNaughton adds.

But this view is not uniformly shared. Michael Purves, a top global strategist at Weeden Co says, “Getting corporate tax relief done in 2017 has gone from a decent chance to remote. That’s a huge contributor to potential earnings.”

Already economists are predicting that the tax cut might not happen in the near future. Goldman Sachs had predicted tax cuts of $US1.75 trillion over the next 10 years, but now, even they doubt if this is actually going to happen and see a serious downside risk to their original assessment.

President Trump originally said that he wanted to cut corporate taxes and bring them down to 15–20 percent, from the present 35 percent. Now this sounds great in theory, but the chances of this happening in the immediate future look very limited. Experts say that we are going to have a watered down tax policy without most of the ambitious tax plans promised earlier.

Jack Ablin of the BMO Private Bank said, “What (the healthcare bill failure) does in my mind is further emphasize the case for international and emerging market equities.”

Jason Ware of Albion Financial Group added, ‘whether or not they hit 20 percent corporate tax rate or 25 percent is immaterial when you look at the big picture’.

Clearly, the industry is not impressed with what’s going on. Meanwhile, stay tuned for the latest US financial and tax news on this blog. We provide only the best-in-class cloud accounting solutions such as QuickBooks hosting, ProSeries Hosting, Sage 50 Hosting, Drake Hosting, Lacerte Hosting, Quicken Hosting and ATX Hosting.