US: Tax reform in the Senate hit a glitch - BBH

Analysts at BBH point out that in the US, tax reform in the Senate hit a glitch yesterday as the issue is that the trigger mechanism that was introduced to secure sufficient votes was ruled improper by the Senate parliamentarian.  

Key Quotes

“There are four Republican Senators that need to be appeased and to appease them may alienate others.  The four senators to watch today are Corker and Flake who want the trigger, Johnson, who wants a greater pass-through tax break, and Collins, who wants to consider the individual mandate for health care separate from the tax reform and the preserve the federal tax break for state and local property taxes.”  

“Like in the UK, the problem is not so much the opposition but trying to manage the governing coalition.  This was the same challenge of the Affordable Care Act.  The Republicans agree that they do not like it but cannot agree on an alternative.  Moreover, there seems to be little doubt that the tax reform will aggravate the disparity of wealth in the US.  The Congressional Research Service estimate that the biggest increase in after-tax income will be experienced by those earning $500k to $1 mln a year, while those earning less than 30k could see a tax increase as early as 2021.”

“US corporates have an estimated $2.3 trln of cash on their balance sheets.  According to the Joint (Congressional) Committee on Taxation, the tax cuts envisioned would give them another $683 bln (over ten years) that under the current law would have been paid to the IRS.  As a proportion of GDP, US corporate profits are twice as large as when Reagan left office in 1988.”