Delayed Gratification for Corporate Tax Cuts
Donald L. Luskin
Monday, November 20, 2017
Phasing-in a corporate tax cut in 2019 makes CAPEX a better deal than if the rate were zero.
Strategic view: 

Tax cuts march on, while the conventional wisdom still says they won’t happen. We still say they will. Clients are concerned by the potential delay of the 20% corporate tax rate in 2019. We don’t see this as harming forward after-tax earnings estimates, or stock prices, nor can competitive firms afford to suspend activity for the sake of income-shifting. It is highly complementary with the provision for immediate expensing of capital investments, raising their internal rate of return by allowing them to be deducted under a high tax rate, and then their fruit taxed under a low tax rate. This should lead to a boom in capital investment, which has been deficient throughout the age of “secular stagnation."