US: Tax reform progress faster than expected – Deutsche Bank

Analysts at Deutsche Bank note that the US tax reform is progressing faster than markets expected, which is positive for corporates, individuals, but its macro impact is likely to be modest.

Key Quotes

“US Congress working towards passing a bill to cut taxes for corporates and households

– odds have improved that this will be achieved by year-end

− House, Senate each passed own version of bill

− Conference to reconcile differences as next step

− Final bill to be closer to Senate version, as this is where voting constraints are

− Expect incremental deficit of $1.4tn over next ten years”

“Tax cuts to be positive for corporates, households

− Corporate: rate cut from 35% to 20% in 2019; upfront expensing of investment; limits on interest deductibility; repatriation tax holiday

− Households: lower tax rates; eliminate most major deductions, including for state and local taxes; tax cuts expire after 2025

− Other: small business tax cuts; pivot to a territorial corporate tax system”

“Despite the positive impact at micro level, overall macro impact looks to be relatively limited

− Impact of only a few tenths of 1% of GDP”