What Wall Street Thinks Of Trump's Tax Plan

Tyler Durden's picture

Over the weekend, several key aspects of Trump's tax plan were leaked, including a reduction in the tax rate for the wealthiest Americans to 35% as well as plans to cut the top tax rate for “pass through" businesses from 39.6% to 25%. While these would be welcome developments for US corporations, they would be relevant only if confirmed in the coming days as the "fluid" Trump tax plan is formalized and, of course, if it were to pass the Senate, which may very well not happen. As Rafiki Capital's Steven Englander writes, "the inability to find 50 Republican Senators who can agree on anything and the diminished authority of the tax reform Gang of Six plus the sense that even at this late stage the Six are not on the same page on tax reform versus tax stimulus makes it hard to take the 'over' on significant tax reform."

As Deutsche Bank also notes over the weekend, "regular legislation would take 60 votes in the Senate and bipartisan support and allow for proper tax reform. However this is seemingly impossible. The  reality is that any changes will likely be made through the reconciliation process. However this first requires a budget being passed by Congress which hasn't been achieved since the Democratic super-majority in 2009-10."

Which is why despite the recent surge in market sentiment that Trump's tax reform is suddenly far more likely, analysts caution investors not to expect too much detail with the release of President Donald Trump’s tax framework this week, let alone passage. As Bloomberg summarizes, the rollout may be designed to show Trump and Congress are unified and committed to aggressive tax reform, Evercore ISI says, while "distractions" (including NFL protests and healthcare repeal) may be helping, as the "Big Six" negotiators stay out of the spotlight, according to Height Securities. 

Below, courtesy of Bloomberg, is a summary of several notable sellside views on what to expect over the coming days as the Trump administration aggressively rolls out tax reform:

EVERCORE ISI (Terry Haines)

  • Expects Big Six (Treasury Secty Steven Mnuchin, NEC’s Gary Cohn, Rep. Paul Ryan, Sen. Mitch McConnell, congressional tax-writing cmte chairmen) to offer top-line proposals aimed at demonstrating the Trump Administration and congressional leaders are unified, and committed to aggressive tax reform and quick legislative action
  • Sees goals of boosting "market excitement" about tax prospects, raising pressure on Congress to expedite FY2018 budget resolution passage (enabling congressional Republicans to achieve tax reform via streamlined budget process requiring simple majorities)
  • Still sees reform as 50% likely; odds rise to 70% if Congress adopts FY2018 budget resolution expediting tax legislation by Thanksgiving

HEIGHT SECURITIES (Stefanie Miller)

  • Expects latest tax reform draft will be very light on detail, will continue to be billed as process starting point
  • "Distractions" - including ACA repeal, NFL protests, updated travel ban restrictions, and Jared Kushner’s use of private emails - are probably helpful to Big Six, other congressional Republicans as they try to control tax plan messaging
  • Distractions at this stage of tax reform may cut the amount of time proponents need to defend their blueprint; Height notes there are divisive components of tax reform even within the Republican Party, framers probably appreciate not holding the spotlight as they work through intra-party negotiations

COMPASS POINT (Isaac Boltansky)

  • Cautions against expecting too much granularity; views release as opportunity to assess Big Six talks so far, and to gauge severity of opposition
  • Watching: Whether mortgage industry becomes more forceful in opposing lesser tax benefit; whether expiring expensing regime will be enough for business interests; how rank-and-file House Republicans respond
  • Still believes odds favor passage of tax package in 1H 2018 ahead of midterm elections

KBW (Brian Gardner)

  • Tax reform outline might disappoint some investors who are looking for more details, specifics
  • May offer some detail on plan for lower corporate, individual tax rates

COWEN (Jaret Seiberg)

  • Still sees best shot for tax reform coming next year as lawmakers increasingly worry about re-election
  • Focus on potential ways to help pay for tax cuts: Roth-ification, reduction of the mortgage interest deduction, elimination of ability of corporations to deduct interest as a business expense

BEACON POLICY ADVISORS

  • Big Six framework release, other tax-reform events should be seen as more of a "messaging effort" than truly substantive, concrete proposal
  • No signs release will change Orrin Hatch’s plans for methodical, bottom-up process of shepherding tax legislation through his cmte
  • Sees little new ground being made on tax pay-fors

Horizon Investments (Greg Valliere)

  • "Exceptionally difficult" week looms for Trump, with issues including healthcare reform, taxes, Alabama, North Korea
  • Healthcare loss would complicate tax reform
  • Treasury Scty Steven Mnuchin is "a bright and wealthy man who knows little about tax policy and getting legislation enacted"; the higher he sets the bar, the more the administration will disappoint investors

Source: Bloomberg

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Bes's picture

if wall street likes it

you lose

period

----

trump is a zio-goldman-neocon

the MIC's best friend

and Goldman Sachs' bitch

#maga

BullyBearish's picture

trumpanyahoo is first in a long line of worsts...and he still has over 3 years to go...

j0nx's picture

Seein a lot of stuff about business rates and wealthy rates but a whole lot of nothing about middle class rates. That worries me.

NugginFuts's picture

What's a middle class? Haven't seen one 'o' them in years!

swmnguy's picture

That's not accidental.

I'd love to see pass-through income taxed at a lower rate, as that's where I get my income.  I'm sure that will be "balanced" by trying to take away the home mortgage interest deduction and deductions for health insurance, though.

W2 employees might get higher standard deductions, which they'll love until they notice their employers are going to be making them pay for their health insurance if that deduction is eliminated.

Most people who get a W2 have no idea where their money comes from or goes to, how much their employer pays in taxes which are directly subtracted from what they should be earning, etc.  Most of them don't have any idea how much health insurance costs, either.  They think they're getting screwed because they used to pay $100 per paycheck and now it's $150 or $200.  They really don't know their employer is paying 5 or 6 times that much for them.  The willful ignorance is astonishing.

Herdee's picture

Tax reform will still have to come with further deficits. They're bust and can't get their spending under control.

buzzsaw99's picture

In the sweet old country where I come from
Nobody ever works
Yeah nothing gets done...

rusty55's picture

Trumps tax plan is garbage so is what wall street thinks of it.  Shepwave has been making great trades lately but they need to get back in and let me konw if I need to get out of today's entry. Made some nice quick profits but do NOT WANT TO LSE THEM.  Tryed emailing. No reply.

swmnguy's picture

You expect on-point customer service from a company that has to use spammers on ZH to gather clients?  Why not try investing through the Biblicism Institute or the Daily Westerner, while you're at it?

Snaffew's picture

it's not a tax cut, trump's proposal equates to nothing more than shuffling the budget numbers around.  Any tax cuts will be offset by increases for consumers in other areas...ie healthcare.  The whole thing is a waste of time and is just political posturing.  it's all bullshit.  trump is a fucking idiot like the rest of the politicians---just a horse and pony show that wastes taxpayer monies.

Blue Dog's picture

Wall Street is part of the deep state. I would be concerned about anything that they claimed to like.

Chupacabra-322's picture

Tax reform?

The Criminal Fraud UNITED STATES, CORP. INC. is economically, socially & morally

Bankrupt.

Forward Banana Republic.

itstippy's picture

The Tippy Tax Plan:

PERSONAL INCOME TAX

* The first $50K of earned income per person is tax-free.  Unearned income remains at 15%.  Earned Income over $50K is taxed at the current rates.  In other words, if you earn $65K you owe taxes on $15K at the current tax rate for $65K earners.

* No tax credits of any kind.  Not for solar panels or electric cars or low income or whatever.  None.

* No tax deductions of any kind.  Not for mortgage interest or children or charitable contributions or anything.  None.

 

BUSINESS INCOME TAX

* All taxes are based on yearly pre-tax profit as reported using GAAP.

* The first $50K of corporate profit is tax-free.  All profits above $50K are taxed at 20%.

* No special deductions or deferalls or credits of any kind.  Congress is specifically banned from any tax preferential legislation.  If you make a profit producing Ethonol, you pay taxes.

* No tax-exempt status for "non profit" organizations.  Not for foundations or churches or hospitals or whatever.  If you're making profits under GAAP, you pay taxes.  This includes the Clinton Foundation, Red Cross, and Catholic Church.  

MEAN BUSINESS's picture

So...#irslivesmatter? How about no personal income tax, no corp income tax, no payroll tax, no capital gains tax, no inheritance tax?

Anonymous_Beneficiary's picture

How about it?

I'll tell you that it's wonderful waking up every day knowing that I get to enjoy ALL the fruits of my own labor.

MEAN BUSINESS's picture

Then you'll be happy with FairTax if you're an American citizen at or below the poverty line...

highwaytoserfdom's picture

Evecore is Altman and the guys that gave the Summers Rubin the funding for the  FANG crony capital. 

 

Altman and evecore got 160m so Zuck at F#ckbook could get 46b out in stock class Clinton/Bush style Foundation...  Which another guy stealing for presidential library foundation.   

 

Wake up  folks whan 10% of the economy is drugs and El Chapo supplied  cash to bail out the Banks in 2008...   have a chance in history...   McConnel Ping may and the banks collecting quarters from the Kstreet laundry  one chance to  speak out....   500 Years Of Stock Panics, Bubbles, Manias, & Meltdowns (In 1 Simple Chart) | Zero Hedge 

The best chance  since the printing press.     http://www.huffingtonpost.com/edwin-black/ibm-holocaust_b_1301691.html 

Yes Billy Aka Mr Softy we know moma on board and Balmer swiped the DEC operating group....    

NEVER AGAIN  

 

 

Endgame Napoleon's picture

I am for the "pass through" tax-relief thing that lets citizens define their small businesses as LLCs, thereby escaping the extra smackdown from taxes.

Other than childless individuals and a few categories of married people, small businesses get kicked the hardest in the lopsided, unfair, teacher's pet of a tax code.

I am for it, even though it really won't help the smallest 1099 contractors or most of the mom & pop businesses, like the one I once owned. The point is to help the businesses that might employ more Americans, specifically the ones making enough net profit to employ CITIZENS.

I am only for the business portion of this tax cut in the context of major immigration reform. Otherwise, they are just giving tax breaks to companies that will mostly use the tax breaks to employ the now 1 million legal immigrants entering the country per year and the millions of illegal immigrants who can work for beans because of welfare & child taxfare credits of up to $6,269 for their US-born children.

Another issue is lowering taxes for dual-earner couples with two high salaries or for single, high-wage households. They do not create jobs. They are taking jobs.

We have already reduced the size of the middle class dramatically with assortative mating. Those high-earner couples already get a large tax cut for their so-called employer-provided health insurance, which is made possible by a $260 billion tax exclusion for their employers.

I guess they'll lose some in the mortgage-deduction area, so maybe, the marginal-rate cut makes up for that. But they already have a ton of money, and during their copious vacation time, they often spend that money on overseas trips, not on things that stimulate American job creation.

Even when dual, high-salaried couples build massive houses or do home renovations--which should employ a lot of American citizens--the work mostly goes to immigrants, not to the underemployed citizens who voted for Trump.

The Republican Establishment thinks this will get them votes, but these tax-cut beneficiaries are mostly the affluent people who vote Republican, anyway, in addition to the limousine liberals in SV and Hollywood, the college administrators and the federal employees making $80k, most of whom will not vote for them.

More Trump voters than they think fall into the single, low earning, salaried or self-employed category and will not feel this tax cut much at all. We must cover all bills from inadequate pay, with no monthly welfare and no refundable tax giveaways for sex and reproduction that equal 4 months of pay.

The cost of rent is killing many Trump voters, taking half or more of monthly pay. This group does not pay enough in income tax for a standard-deduction adjustment to help much, but eliminating the mortgage deduction does make the tax code a little fairer to renters who pay steeper and steeper rent due to so much competition for rental units from mass waves of immigrants.

The thing that hurts many self-employed Trump voters is SS tax that we owe on every paltry amount that we make. More and more people are working 1099 contract jobs for low amounts of pay. We pay twice as much SS tax -- just over 15% instead of just over 7.5%.

So, dual, high-salaried couples, both making $10,000 per MONTH in salaried income, will get a 4% income tax reduction, even though they pay only 7.5% SS tax up to the $127,200 cap. We self-employed low earners will still be paying over 15% in SS tax on every $100 that we make.

It is the high-wage / high-salaried earners who will feel this tax break the most, in addition to businesses, and it is now up-in-the-air whether or not businesses will increase the number of full-time jobs for U.S. citizens.

I do not notice salaried, high earners taking any risks to employ Americans. They do the safest thing they can, taking two jobs with benefits out of the economy in a nation full underemployed citizens, including millions of underemployed college grads.

High earners will get a 4% tax cut. Maybe, it is a good time to get back into the custom-luxury business. Oh, that's right, I lack the capital. This tax cut will not help at all.

I am skeptical about the job-generating effect of this tax cut, especially without the commitment that Trump voters expected for a major immigration overhaul. But, I do not know that it will hurt me that much unless they put in another child tax credit, which will definitely hurt childless women, like me, in the many already-mom-dominated industries.

But, if The Swamp keeps the money, they won't pay down national debt with it. They will just spend it on more fake-feminist, social-engineering projects to rig the job market for working moms. Of course, the take code, itself, is often used for that purpose.

MEAN BUSINESS's picture

These are not the tax cuts you're looking for...

but you're right, there is a connection in all of this with Immigration legislation overhaul.

But first, I don't buy the hogwash these analysts peddle. Listen to what Trump says. He recently has talked about the trillions of dollars that won't be repatriated because... corporate income tax. FairTax drops the corporate income tax rate to... ZERO. That money is free to come back and the result is... good paying jobs and lots of them.

FairTax has one bracket for individuals too; ZERO % bracket.

Immigration needs to be re-written so that one way or another, either mass deportation (which is rediculous except to hard-core ideolouges) or status as a legal househld with a path to citizenship. Why? Because under FairTax, everyone is paying federal tax every time they buy something but only LEGAL households get the prebate.

And BTW, healthCare, FairCare, needs to be unhitched from the peg to income that ACA requires, and peg it to... take a wild guess (Hint: see Ryan's AHCA) (ok, it's pegged to age)

You know, VPOTUS Pence is a tax lawyer. He is a co-sponsor of H. R. 25 FairTax. See FairTax.org

#irslivesmatter - retweeted nobody ever : )

Jasher's picture

1 And it came to pass in those days, that there went out a decree from Caesar Augustus that all the world should be taxed.

(And this taxing was first made when Cyrenius was governor of Syria.)

And all went to be taxed, every one into his own city.

20 Then shall stand up in his estate a raiser of taxes in the glory of the kingdom: but within few days he shall be destroyed, neither in anger, nor in battle.

35 And Jehoiakim gave the silver and the gold to Pharaoh; but he taxed the land to give the money according to the commandment of Pharaoh: he exacted the silver and the gold of the people of the land, of every one according to his taxation, to give it unto Pharaohnechoh.

37 After this man rose up Judas of Galilee in the days of the taxing, and drew away much people after him: he also perished; and all, even as many as obeyed him, were dispersed.