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The markets are now mostly downbeat following the release of the Republican Senate’s proposed tax cuts that revealed its pushed back schedule and implementation as well as plans of the Senate to drop a number of taxes on both corporate and individuals. Due to the uncertainty regarding the tax reform in the United States, both the markets and the U.S. dollar declined shortly after the proposal was revealed last week.

Proposed Tax Cut

After months of delay, the House Republican finally unveiled its proposed plan to cut corporate tax rates from 35% to only 20%. According to the House Republicans, the proposed tax reform cuts is planned to be implemented immediately. However, the Republican Senate stated that it would delay the proposed cuts for another two years sending most of the markets into uncertainty.

The outline of the tax plan proposal revealed that it would keep a number of tax breaks including mortgage interest, medical expenses, and a 10% bottom tax rate for low earners. In the proposal from the Senate Republicans which also proposes a one-year delay of corporate taxes being delayed for one-year as the government brings back tax breaks for middle-class families.

Despite this, the proposed tax cut plan would also drop both state and local tax cuts completely and push back the 20% corporate tax rate to the year 2019, therefore, dampening most economic growth projections and outlook made by most economists during the past couple of months.

This also becomes a conflict to a number of bills which some Republican lawmakers plan to propose and get implemented as it will now need changes to their drafts while some are still concerned on how the tax cuts would result in a higher federal budget deficit.

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Effect On Global Market

Shortly after the reveal of the U.S. tax reform plan, the U.S. dollar traded down against the yen from its seven-month high of 114.735 yen from the previous week while the Euro declined from its first weekly gain the past four weeks at $1.1647

Although most European shares were not affected by the news, most U.S. stocks declined with the S&P 500 index losing its eight-week high. In Asia, Japan’s Nikkei index lost 0.9% sending MSCI’s Asia-Pacific Index down by 0.5%.

Private equity firms have stated their intention to start a lobbying bonanza in the state capital as parts of their efforts in protesting against a number of the provisions stated in the proposed US tax plan by the Republican Senate.


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