Despite All the Vegetables, Some Very Sweet Treats
We view yesterday as incrementally positive for tax reform’s prospects and therefore reposition our 75% odds as now trending up that both chambers of Congress can pass a measure by the end of 1Q2018. We were encouraged by the following developments in areas we’ve been watching: 1) reaction by House Ways and Means Republicans that was mostly positive, with only a few silent and no negative responses; 2) resoundingly positive endorsements by pro-business groups the U.S. Chamber of Commerce and Business Roundtable; and 3) even some indication that conservative House Democrats may be in play during future negotiations. We were further encouraged by the Joint Committee on Taxation score released late yesterday afternoon, which revealed that House tax writers have pieced together a final draft that costs $1.487 trillion, less than the maximum $1.5 trillion, and does not rely on revenues from individual-side reforms to pay for corporate cuts, satisfying many of the procedural and political revenue requirements we’d previously identified as necessary for passage. Therefore, we think there is plenty of room for horse trading over the weeks and months to come that again reinforce our 75% odds for eventual passage. Today’s report covers the broader political environment for tax reform, identifies where some of that horse trading will likely take place, and dives deeper into several provisions with sector-specific implications across financial services, housing, healthcare, technology, and energy & industrials.