Donald Trump’s plan to cut corporate taxes by a deeper-than-expected amount is welcome news for the majority of CEOs who want more capital to invest. Whether the plan will get through Congress is another matter.
White House officials last night confirmed news stories that the president will target a 15% headline corporate rate, ahead of an announcement by the president, expected Wednesday.
Few business leaders would begrudge the rate, which is lower than a 20% level proposed by House Republicans. The problem is that Trump and his inner circle appear to be arguing Arguments over whether that’s theoretically even possible aside, House Republicans, including speaker Ryan, are skeptical. They were hoping to impose a 20% border-adjustment tax on all revenue earned from imports to help fund a reduction in the headline rate to 20% and avoid adding to a bloated national budget deficit.
Whether a border tax will feature in the mix remains to be seen, but all signs are pointing to it being dropped. If the Joint Committee on Taxation deduces that the plan isn’t revenue neutral, which is likely, it would have to expire within 10 years, creating more uncertainty for business. that the cut will pay for itself, due to all the economic activity it will create.
A string of surveys, including Chief Executive’s, have indicated that CEOs are more confident about the economy than at any time in the past eight years, though it’s hard to separate how much their enthusiasm is being driven by the promise of tax cuts or prevailing improvements in the health of the U.S. economy more generally.
The heads of two of America’s biggest banks aren’t fretting too much over the daily news cycle. JPMorgan’s Jaime Dimon said it was typical for new administrations to experience ups and downs in their first year, while Citigroup’s Michael Corbat reckons some form of tax reform is inevitable.
“While the details of potential policy changes in the areas such as tax code and infrastructure spending have yet to be worked out and will take longer than originally projected, we continue to believe that it’s a matter of when and not if these changes will occur,” Corbat said. “As that process unfolds and becomes clearer, I expect business will react accordingly as sentiment shifts from optimism to confidence.”
Other CEOs aren’t so sure. BlackRock’s Larry Fink has warned that investors who have driven equity markets to record highs could be in for a nasty correction, should the president fail to unify lawmakers that have already dealt a major setback to his healthcare plans.