US Futures Spike After Gary Cohn Promises Tax Reform By Year End

Having hugged the flatline for much of the overnight session, S&P futures have spiked after the FT released an exclusive interview with Gary Cohn shortly after 5am ET this morning, in which Trump's chief economic advisor (and most likely future Fed chair) said that Trump's agenda and calendar "is going to revolve around tax reform" starting next week, assuring passage by year's end. Cohn explained that in the next three or four weeks, the tax bill will be written in the ways and means committee and Congress is "going to own" the writing of legislation. As a result, reform "can pass both of the tax committees and both chambers in 2017."

“Starting next week, the president’s agenda and calendar is going to revolve around tax reform,” Cohn said “He will start being on the road making major addresses justifying the reasoning for tax reform and why we need it in the US.”

Cohn also laid out the coming calendar, with kick-off set for next Wednesday, August 30, in Missouri when Trump will deliver a speech which will be "the first in a series of addresses designed to convince the US public about the need to revamp a tax system that has remained largely unchanged for three decades." Confirming the recent Axios report which sent stocks surging earlier this week, Cohn said that the tentative framework has been already agreed upon with  "key Republicans on Capitol Hill — House Speaker Paul Ryan, Senate majority leader Mitch McConnell, and Kevin Brady and Orrin Hatch, the heads of the congressional tax-writing committees — had agreed a framework that would serve as the basis for a bill that will be hammered out over coming weeks."

More importantly, Cohn once again reset timing expectations, and said "he hoped that the ways and means committee, the House panel that initiates tax legislation, would draft a bill over the next three to four weeks, and that he believed Congress would pass legislation this year."

Cohn also provided some further details on what Trump's tax plan would entail: "the plan would preserve three of the biggest deductions for individuals: on charitable donations, mortgage interest payments and retirement savings. It would raise the standard deduction cap that applies to most tax filers, but would eradicate many other personal deductions, he said, adding that the White House also wanted to get rid of “death taxes”, Republican terminology for estate taxes, which will face resistance from Democrats”.

Cohn also said the White House would be “excited” if "Democrats worked with Republicans on a bipartisan bill. But he said the administration would use a process called reconciliation — which prevents a filibuster in the Senate where the Republicans have a thin 52-48 majority — that would allow tax reform to pass with a simple majority, but only if the legislation is revenue-neutral within 10 years."

In a separate discussion on the latest social events that clouded the Trump administration, Cohn said Says Trump administration “must do better” in "consistently and unequivocally condemning" neo-Nazis and white supremacists following the violent protests in Charlottesville this month.

Cohn said he faced “enormous pressure” both to resign and to remain after Trump’s reaction to clashes, and said he feels "compelled to voice my distress over the events of the last two weeks." Cohn also said that "citizens standing up for equality and freedom can never be equated with white supremacists, neo-Nazis, and the KKK."

“As a Jewish American, I will not allow neo-Nazis ranting ‘Jews will not replace us’ to cause this Jew to leave his job. I feel deep empathy for all who have been targeted by these hate groups. We must all unite together against them.”