On February 9, President Donald Trump told manufacturing CEOs during a White House event that he was going to release “something phenomenal in terms of tax” in two or three weeks time.
As of April 10, eight and a half weeks later, no tax plan has been released by the White House and, based on reports, it doesn’t appear to be coming soon.
Since the early days of the campaign, Trump has said that he wants to slash corporate taxes to 15% and cut personal tax rates drastically.
The plan to do so may not come for a while, however, as the Associated Press’ Josh Boak and Stephen Ohlemacher reported that Trump officials have scrapped the outline for tax reform Trump released during the campaign and are writing a new plan.
Additionally, according to the report, the White House is writing their own version of a tax plan rather than signing on to a plan from congressional lawmakers as they did on healthcare. That plan, the American Health Care Act, failed to pass the House and the misstep has left analysts concerned over the future of Trump’s agenda.
The New York Times’ Andrew Ross Sorkin also reported on March 28 that Trump officials were working off a 20% baseline for corporate taxes and the number may end up as high as 28% — similar to proposals from former President Barack Obama in 2012 and much higher than the 15% Trump promised before the election.
Additionally, the overhauling of the tax plan appears to have Trump administration members doubting their self-imposed deadline for passage of the plan. Treasury Secretary Steven Mnuchin told CNBC on February 27 that he wanted the tax plan to be signed by Trump before the August congressional recess.
Based on the AP report, this is also in doubt, according to people close to the White House.
Additionally, other top Trump officials have been throwing cold water on the August deadline. Gary Cohn, one of Trump’s top economic advisors and former Goldman Sachs COO, told Bloomberg TV on Friday that he doesn’t know “if it’s August or not” for tax reform.
“Getting it done well and getting it done right is more important than getting it done soon,” Cohn said.
Wall Street has been anxiously waiting clarity on the issue as a lower corporate tax rate would boost profits from companies and help justify the post-election runup in stock prices.
It does appear, however, that investors’ hope for tax reform coming anytime soon has been fading as companies with a higher tax bill — the biggest potential winners from a tax cut — have begun to underperform those companies with a lower tax bill. This indicates that investors may not expect the boost to profits from lower taxes to be coming imminently.
Trump is also casting a wide net on possible changes to the tax code.
The Washington Post reported on April 4 that the administration was considering a carbon tax and a value-added tax to raise more revenue, both of which are generally not supported by conservatives. Later that same day, however, a Trump spokesperson said that “as of now, neither a carbon tax nor a VAT are under consideration.”
The administration is also wrangling with the idea of a border adjustment tax, which is favoured by House GOP leaders such as Rep. Kevin Brady, the chair of the Ways and Mean committee. The BAT would favour exporters and tax importers more heavily, though the exact mechanisms of the tax are still unclear.
This tax, however, has faced pushback from a number of Republican senators and major retailers. Additionally, it is questionable whether it would be allowed by the World Trade Organisation.
Thus, Trump is wrangling to figure out what to include in the tax plan, how much to lower taxes, and how long it will take to get the job done. All the while, Wall Street anxiously awaits.