Making the Most of Corporate Tax Reform
Although nothing major has happened yet, rest assured that corporate tax reform is on the way. The Trump administration has made big promises and at some point they are coming. So far, the president has proposed reducing the corporate tax rate from 35 percent to 15 percent, while republican leaders in Congress have proposed a slightly more modest reduction to 20 percent.
Either way, the cut would represent a significant reduction form the current rate of 35 percent and corporations would see a huge boost. For example, if the effective tax rate dropped to 8.4 percent, then S&P companies would see the amount of pretax income they keep jump to about 85 percent from the current amount of about 76 percent.
The president has also proposed a repatriation rate of only 10 percent. In other words all the corporate income that companies are currently holding overseas in order to avoid the 35 percent U.S. corporate tax rate would only be charged a 10 percent rate if it were brought home to the U.S. There could also be a removal of the interest-deductibility, which could actually hurt earnings, but the tax breaks would far outweigh the losses.
Therefore, if you add it all up you get a lower corporate tax rate that would boost earnings by about 11 percent combined with a repatriation rate that would boost earnings another 2 percent. Removing the interest-deductibility would lower earnings by 2 percent, therefore leaving a net boost of 11 percent to S&P 500 earnings.
The State of Silicon Valley | Russell Hancock
About Russell Hancock Russell Hancock is President & CEO of Joint Venture Silicon Valley, a position he has held since 2003. In this role Dr. Hancock is best described variously: as a civic leader, community gatherer, institution builder, social entrepreneur, and outspoken advocate for regionalism. Since taking the helm of Joint Venture he has quadrupled…
Learning to Live Abroad | Keith Van Sickle
About Keith Van Sickle Keith grew up in Alameda, California, the son of public school teachers. He got his first taste of overseas life while spending a college term in England and later backpacked around the world for six months. Grateful for the scholarships that helped him pay for college, in 1987 he started…
Becoming Part of the Solution | Troy Downing
About Troy Downing Troy is a strong supporter of smaller government, the 2nd Amendment, and economic prosperity for all through lower taxes. An avid outdoorsman and huntsman, Troy firmly believes that we need true political outsiders in Washington to stand up for Montana against the federal government whenever necessary. Troy started as a Research Scientist,…
Inspiring Others to Succeed | Ray Dillon
About Ray Dillon Ray Dillon began his career as a process engineer working for the Zellerbach Corporation in Bogalusa, Louisiana. As Ray began his career the mill he was working at was just starting to modernize- an enviorment which Ray as a young engineer thrived in. He quickly rose through the ranks and eventually…