Wall Street and Corporate America Biggest Winners of Tax Reform

President Donald Trump has campaigned his Tax Cuts and Jobs Act since the beginning of his election as a change that will benefit middle-income Americans.  While it remains to be seen just how much Main Street USA will benefit from the tax reform, one things is clear – the biggest winners are Wall Street and Corporate America.  

With the reduction in the corporate tax rate going from 35% down to 21% permanently, this essentially gives corporations a 40% tax cut.  There is also a 20% tax deduction for all pass-through companies such as LLCs, Partnerships and S-Corps.

This reduction in income taxed to corporations was the main focal point of Trump’s campaign.  These new corporate tax rates take the tax rate of US companies closer to Canada’s 15% rate, or the rate of 12.5% in Ireland.  For the first time in a long time, corporate tax rate in the US is lower than in Mexico which has a 30% corporate tax rate.  

Relief for American Companies Operating Abroad

When American companies earn money overseas, they will no longer owe taxes on that money.  While this could possibly encourage some companies to keep their profits in foreign lands, there are also incentives to repatriate those profits back to the US.  Under the new tax plan, when money is brought back into the US, corporations will owe tax a rate between 8% and 15.5%, which is quite a bit better than the current 35% tax owed on repatriated funds.  This gives companies incentive like they haven’t had before to bring those funds back into the US to further spur economic growth.  

Apple is the world’s most valuable company, and just recent issued a press release in which they announced they will repatriate funds back into the US generating a tax bill of $38 billion – the largest in history.  Their plan also includes investment into capital spending in the US.  

We have been experiencing the longest period of calm in the market in history, even more so than the mid-90’s.  This is reflective of the excitement which some are calling euphoria driving the market continually upwards.  It seems that Corporate America is voicing how they feel about tax cuts.  

Great Point Capital specializes in equities and equity options, serving the trading community since 2001.  We have a strong network of experienced and knowledgeable traders actively trading the firm’s capital on the most advanced software platform available.  We are one of the few firms offering access to the Takion platform, enhancing your trading performance.  Contact us today to learn how you can earn your maximum potential in times of high or low volatility from experienced traders with proven strategies.