Tax cut optimism may be overblown

Wall Street Journal columnist notes health care resolution must come first, making any tax reform more distant

Mar 22, 2017 @ 1:31 pm

By InvestmentNews

Even if new health-care legislation makes it through the House and Senate, the timing is likely to push tax reform into next year, pushing tax cuts further into the future, says Wall Street Journal columnist Justin Lahart.

"Investors who are assuming a more aggressive timetable also are assuming companies will have stronger cash flows over the next 12 months than they are going to get," he writes, noting that "the longer the health care debate drags out, the harder it will be to craft a tax-cut package."

The Republican tax plan includes a drop in the corporate tax rate to 20% from 35%, which could lift S&P earnings by 10%, according to estimates from Goldman Sachs cited by Mr. Lahart. If Republicans have to settle for a tax cut in the 30% range, for example, "Goldman estimates it would raise S&P earnings by just 4%," he said.

While companies would like that, investors, "who have given stocks lofty valuations in expectation of something more, might not agree."

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

3 Questions to ask yourself when making your succession plan

Michael Futterman from Janus Henderson Investors has sage advice for advisers as they approach retirement.

Latest news & opinion

No 'stay bonuses' for Cetera Financial Group reps

Firm confirms brokers will not be offered retention bonuses to stay on after acquisition by Genstar Capital.

Cetera Financial Group brokers taking wait-and-see attitude on sale

One issue in the wake of the firm's acquisition is whether they will be paid 'stay bonuses' to remain at the brokerage.

Fidelity backs away from being 'point in time' fiduciary for 401(k) plans

Some advisers think this indicates other providers will pivot in light of DOL fiduciary rule's death.

Morgan Stanley CEO is happy that brokers are staying put

Firm has seen little attrition since it dumped the broker protocol last fall, Gorman says.

Bills to reform adviser regulation, increase sophisticated investors and protect seniors pass House

Measures included in package of 32 bipartisan bills meant to ease rules, spur investment

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print