May 172017

Wash. D.C.

The Comey firing “diminishes our confidence in the administration’s ability to tackle tax reform” wrote Brian Gardner, Washington analyst for Keefe, Bruyette & Woods, in a note to investors. He described a “pattern in which the White House ricochets from controversy to controversy, does not lay the groundwork for major announcements and fails to coordinate with its political allies before making major political moves.” As a result, the best that might result is a pared down version of tax reform, focused on businesses. James Brockway, a partner at the New York based Withers Bergman law firm, who specializes in taxation, forecasts that tax reform-lite will feature a reduction in the corporate rate to 25 percent from the current 35 percent and repatriation of U.S. corporate cash parked overseas, where rates are lower.

But there won’t be tax cuts for individuals, Brockway said, predicting that “comprehensive tax reform won’t happen,” at least not soon. The legislative tug of war, complicated by legions of lobbyists and bucets of campaign contributions, tends to be more difficult for individual taxes than for corporate ones. That’s because individuals vote. For instance, one omission from the Trump tax plan unvieled in April was continued deductions for state and local taxes. That ignited a firestorm of criticism from lawmakers representing the more populated states, which typically levy higher taxes.

Putting off the question of individual taxes coud be tricky for Mr. Trump, who campaigned on a promise of a lighter tax load for people, not just businesses. Even before Comey’s removal, expectations of a delay in tax reform were rife, mainly because the effort needed to repeal and replace Obamacare showed the difficulty of getting anything through a fractious Congress. Tax reform expections were not realistic at that point.

In 2017, the economic situation is solid, if uninspiring. To Greg Valliere, chief global strategist at Horizon Investments, the saving grace nowadays is that “moderate growth, low inflation, tolerable interest rates, good corporate earnings will persist.”

  •  05/17

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