#214: How Tax Reform Affects Your Wallet

The market, as well as investors, will be following the big meeting this week between President Trump and the president of China. They will be discussing trade, currency manipulation, and North Korea.

Why President Trump should start with corporate tax reform

tax reformTax reform is next on President Trump’s agenda after healthcare. Hopefully, he will work towards corporate tax reform first instead of personal tax reform, at the moment, because it is politically much more achievable and easier. This would be a good first down to get.

Why President Trump should start with tax cuts

tax reformWe must remember that there is a big difference between tax reform and tax cuts. Tax reform is very complex as you are dealing with deductions and rewriting very intricate tax code. Tax cuts are just a slash, which makes it much more politically feasible and easier to understand. This helps politicians as they go back and sell it to their constituents. Tax cuts would give the Trump administration a quick win which, over time, would give them some political capital to make a more difficult tax reform.

It’s simple math

Lower taxes = higher corporate profits + higher earnings + more hiring + more capital spending + higher increases.

tax reformHigher earnings should help investors’ portfolios go higher. Earnings are the mother’s milk of the market and as profits rise you get higher prices. Lower taxes lowers the input cost of a company, whether it is energy or healthcare.

Can it be done?

There is a lot to accomplish here with tax reforms and hopefully the administration can do that. The markets would like that and your investments should also.
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