Alexander Green on the GOP Tax Bill and the Paradise Papers

By Samuel Taube

Transcript:
Samuel Taube: Joining us by phone today is Alexander Green, the Chief Investment Strategist of The Oxford Club, and we are talking about the new tax bill, which was unveiled to the public recently. Alex, thanks for joining us again.

Alexander Green: Thanks for having me, Sam.

ST: So what aspects of this GOP tax plan stood out the most to you?

AG: Well, I think it’s an enormous positive. Tax reform is long overdue. I am a little disappointed. It’s more of a tax cut than real tax reform, but it’s a step in the right direction. So let me talk a little bit about what the plan entails as it is now and then talk about how it would positively impact the stock market.

For households, it does a number of things. It collapses the number of marginal income tax brackets from seven to four. The four rates now will be 12%, 25%, 35% and 39.6%, which is still the top rate for people, but only if they earn over $1 million.

It eliminates the alternative minimum tax, doubles the amount of the standard deduction and eliminates the personal exemption – and of course, people who live in high tax states aren’t going to like this ­- but it eliminates the state and local tax deduction.

It creates a new tax rate for pass-through businesses, and what it would do is create a 25% tax rate for sole proprietorships, partnerships and S corporations. These are all forms of pass-through businesses.

And they currently pay taxes at the individual rate, but now they’ll pay just 25% – but unfortunately only on 30% of their income. The rest they’ll pay at the personal income tax rate.

And here’s the part that I think is going to spark the biggest increase in economic growth. It lowers the corporate tax rate to 20% from 35% – that’s the highest rate in the developed world.

It eliminates most business deductions and credits, and it would implement a one-time repatriation tax on profits held overseas. And of course it would end the estate tax, something that 33 states and even Sweden have already done. So that too is a positive.

ST: I see. So a fairly complex plan, it sounds like. You started to touch on this, but how do you see this affecting the stock market, assuming it becomes law? And how do you see it affecting consumers and businesses?

AG: Well, I should preface these remarks with the fact that, of course, what we actually see signed into law could be quite a bit different from the plan that’s been proposed. But it’s an enormous positive.

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Obviously, when you reduce the corporate tax rate, for instance, it makes it more likely that a foreign corporation will set up a business here or expand operations here.

It makes it more likely that someone will start a business because obviously the simpler and easier you make business formation and expansion – the less friction you have with red tape and other bureaucracy out of Washington – …read more

Source:: Investment You

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