From Goldman:
Q&A on the President’s Tax Reform Plan
- The White House announced a slightly revised set of principles for tax reform, which appear to incrementally reduce the size of the proposed tax cut compared with the President’s campaign proposal, and eliminate a few of the differences between the campaign plan and the House Republican blueprint on tax reform.
- That said, the White House proposal is still likely to reduce tax receipts by substantially more than the House proposal would. While the White House appears likely to rely on optimistic growth assumptions to offset most of the fiscal effects of the proposed tax cut, Congress will not be able to do so and must decide whether to pursue revenue-neutral tax reform or an explicit tax cut. While no decision is imminent, today’s announcement and indications of openness to a tax cut among congressional Republicans suggest that a tax cut is more likely than revenue-neutral reform.
- We expect a long road ahead for tax legislation. While we believe there is a good chance that tax legislation becomes law—in fact, market participants might be underrating the odds of tax cuts, a change from earlier this year—there may be few concrete legislative actions on tax legislation over the next couple of months for markets to react to.
