C A P I TA L M A R K E T S F O R E C A S T 2018
THE 2017 TAX REFORM BILL: HOW WILL IT IMPACT THE INVESTMENT LANDSCAPE? The Trump administration ended its first year in office by securing its first major legislative victory, the Tax Cuts and Jobs Act.1 Signed into law on December 22, 2017, it amended the Reagan administration’s Internal Revenue Code of 1986, the last time the tax code was comprehensively overhauled. Unlike then, these reforms were agreed to more quickly, but without bipartisan support.2 The 2017 bill is also likely to be more expensive, because it was not designed to be “revenue neutral”; according to the non-partisan Congressional Budget Office, it will add as much as $1.5 trillion to the national debt over the next 10 years.3
1 See https://www.congress.gov/bill/115th-congress/house-bill/1 for details. 2 Unlike 1986, the 2017 bill was agreed to by a process of “reconciliation” between versions proposed by the House of Representatives and the Senate, allowing the Republican Party to take advantage of its simple majorities in both chambers of Congress. 3 Such a significant increase in the deficit could trigger automatic spending reductions under Senate PAYGO (i.e., pay-as-you-go) rules. This could reduce the ultimate cost of the bill, as could higher tax revenue received if economic growth picks up in a sustained way.
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