Impacts of Tax Reform --- My First Thoughts

Senate passed the messy tax reform bill last night. The new tax code will start in 2019 (not 2018). The next step will be negotiation between Senate and the House to put together the final bill for Trump to sign.

Put aside how the tax reform will affect personal finance, one thing is for sure --- corporate tax rate will drop from 35% to 20%. Multinational companies will also bring cash back to US.

Corperate Tax Rate Drop

Well, many big companies have already managed to pay low tax rate, for instance, IBM pays only ~10%. You can find tax rate information in companies' ER. Therefore, not everyone benefits from the 20% tax rate. Following are a few companies who are paying tax rate > 35% (most in retailers and restaurants).

Restaurant: CMG, DENN...

 Retailers: CVS, LVS, GPS, JWN, M...

 Auto retailers: AN, KMX...

 Healthcare: Anthem, HUM, DGX, DVA...

 Transportation: JBHT, LUV...

 Energy: COP, PSX...

 Industrial: GWW...

 Financial: SCHW, PAYX...

 Utility: WEC...


Big Cash Abroad

These companies can bring back cash to buy back stocks, pay down debts, take-over other companies, hike dividends to give investors better return.

Such companies include: AAPL, MSFT, CSCO, GOOG, WDC, PFE, CELG, GILD, BIIB, JNJ, GE, CAT, V, MA ...

You may find the long list HERE.


Health Insurance Mandate --- gone

The impact of removing insurance mandate is unclear to me yet.

Higher Spending?

Will customers spend more if you have more cash in their pockets? It depends on how middle-class benefit from the tax reform (the poor pay little tax, the rich spend the same). It is still unclear to me yet. However, if they do, Retailer and Financial Sectors will have a bright future.

Well, since this Tax Reform has already added HUGE deficit ($1.5T in next 10 years) to the budget, the promised Infrastructure (Trump promised repeatedly $1T spending) is NOT possible!

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