Sep 15, 2017

Stock Market, Tax Reform

I think the catalyst for the rise in the stock market continues to be the enthusiasm that really started yesterday based on president Trump's announcement that he was close to a deal on tax cuts and that the deal is supposed to be announced sometime before the end of the month.

Now of course, I've seen this movie before. I mean Trump has come out and made a lot of statements about a deal being ready being on the table, gonna happen soon and of course so far every time he has touted this nothing has materialized. 

Yet the markets are not looking at the boy who cried wolf, now they actually believe the President, they think he's serious and one of the things that he's saying that maybe makes this more credible is that he's saying that he's working with the Democrats that if he can't get something done with the Republicans he's already working on a plan with the Democrats and so one way or another we're gonna get this major tax reform.

But of course it's not really going to be tax reform. It's going to be tax cuts based on what the President is saying. We're not going to reform the tax code, we're not going to have a major shift that is going to make the economy more productive. 

The  President has already said that the rich are not going to get a tax cut at all. They may even have a tax hike. So if you're not going to lower the top rate if you're not going to reduce the marginal rate of tax you're really not going to get any economic stimulus because that's where the growth comes from. Where you lower the marginal rate and you may have a situation where people actually work harder at lower tax rates and produce more taxable income.

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