Delayed Gratification for Corporate Tax Cuts
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."