US: Clearance for final version of Tax Bill - Rabobank

Analysts at Rabobank note that the House passed the final version of the USD 1.5tn tax bill by 224-201 and is ready to be signed into law.

Key Quotes

“It’s however not entirely clear when this will actually happen, but there are reports noting that it will be postponed until early January 2018 to ensure automatic spending cuts to programs as Medicare aren’t triggered. So, it’s still not completely over yet, but Trump’s first major legislative victory is a fact.”

“Even though these massive tax cuts are branded as a “middle-class miracle”, most independent analyses have found that this is nothing more than a catchy alliteration. Indeed, it’s quite an accomplishment to hand out USD 1,500,000,000,000 and still be regarded hugely unpopular. The public opinion of the tax overhaul has worsened recently. According to a NBC/WSJ poll, just 24% of the surveyed respondents saw the cuts as a good idea, whereas a majority thinks this only helps corporations and the wealthy instead of the middle class – to whom the cuts are being sold.”

“It’s just eleven months until the mid-term elections and the Republicans hope that the tax cuts, which will be reflected in pay checks come February, will finally raise the popularity of the current administration. That will be necessary, as early polls show that the mid-terms might turn into a bloodbath where even some ‘very safe’ Congressional districts may change colour. The average lead in early generic polls for the Democrats is a stunning 13.4 percentage points, according to the New York Times. It’s highly unusual that the party in power loses this much support this early in the electoral cycle and with these levels of investor, business and consumer confidence.”

“There was no uncertainty that the House wouldn’t vote for the tax cuts again and the market reaction was therefore muted. In fact, the S&P 500 even declined -0.08%.”