Trump’s Tax Cut Nuclear Option
Trump’s daring proposal to eliminate the deductibility of state and local taxes is a “nuclear option,” an unbeatable bargaining chip against Democrats. Blue states get 65% of the $62 billion tax break, with just six taking more than half. Under “reconciliation” in the Senate, the GOP can take that break away at will with no Democratic votes, provided it is willing to live with mandatory “sunsets” on tax reform. To preserve the break, eight of the ten Democratic senators facing re-election in 2018 in states Trump carried are likely to vote with the GOP, making tax reform permanent. The artful way Trump rolled out his tax initiative has his opposition on its heels, and has earned applause from conservatives who might have been blockers. Stocks have been soggy since the seemingly weak roll-out, but this is a very pro-growth policy thrust with a high chance of enactment Demise of the BAT policy option, and the French election, have weakened USD, which is a positive for China and the emerging markets ecosystem.