Tax Cuts Start to Get Real

Yesterday’s GOP "unified framework" for tax cuts is another skeletal document, very light on specifics. In almost all ways it is Trump’s vision – it is just what he campaigned on, and it shows his growing mastery that the fractious GOP is making a self-conscious show of being “unified” behind it. Trump has taken his barnstorming tour to a third red state with a vulnerable Democratic senator, and the threat of eliminating the deduction on state and local taxes remains a nuclear option for the end-game, to secure Democratic votes in the Senate. We think markets are moving a little toward believing that tax cuts are possible. As proposed, these tax cuts would be a powerful supply-side shock, leading to faster growth, upside for stocks, and higher bond-yields.