On Trump’s Tax Cut Proposal
The Trump administration announced tax cut proposals, which are substantially identical to his campaign platform. It’s only a one page position paper, promising that May would be spent in “listening sessions” with stakeholders.” We think the excitement in the run-up to today’s announcement is responsible, more than the French election, for the big risk-on move in global markets. Now we wouldn’t be surprised if markets showed some disappointment at the vagueness of it all. The border adjustment tax is gone, and the only protectionist feature is a one-time tax on corporate cash held overseas, whether or not repatriated. The administration has actively pre-sold tax cuts as pro-growth stimulus, and capable of “paying for themselves.” We think the math is credible. For the GOP, deficit-phobia can be set aside, and for Democrats – especially the ten Senators facing re-election in 2018 in rust-belt high-unemployment states carried by Trump, it will be difficult to vote against anything positioned as stimulus.