Time is ticking to pass tax reform


With a light economic calendar thanks to this Thanksgiving holiday-shortened week, Wall Street will once again focus on the tax debate.

Last Thursday, November 16th, the House of Representatives took a major step toward tax reform by passing its version of a bill by a vote of 227 to 205. On the same day, the Senate Finance Committee passed a different version of tax reform that will be voted on after the Thanksgiving break.

There are some major differences between these two bills, including how the deduction for state and local tax deductions are handled, the timing of the corporate tax cut, and healthcare. It's important to note that the Senate can only lose two votes, and there are already about five Republican Senators indicating they are against this bill.

The next steps of tax reform will be the consideration of every amendment to the Senate Finance Committee's version, with each amendment getting 10 minutes for discussion. This is procedure is known as a ‘vote-a-rama’ and could last a few days.

If the Senate bill passes, a conference committee would ‘reconcile’ the differences between House and Senate versions to come up with compromised bill. That final bill would then go to a vote before Congress. If it’s approved by both chambers, the bill would then be sent to President Trump for his signature.

However, time is running out this year. The Senate has 15 days and the House has only 12 days left in session in 2017. Odds are low - but not zero - that legislation is passed in 2017.

While tax reform will be watched closely, Wall Street has also been paying very close attention to global economic growth. For the first time in a long time, all major economies are experiencing healthy economic growth.

The year-over-year growth rates through September 30th were 2.3% for the U.S., 2.5% for the Eurozone (made up of 19 of the 28 countries in the European Union), 1.7% for Japan, and 6.8% for China.

The Simply Money Point 

Solid economic fundamentals support the investment markets, and at Simply Money Advisors, we believe this will help stock prices rise over the coming months.

Further, if tax reform is passed, corporations should see higher corporate profits, which should also benefit your stock investments. Bonds should continue to add value because the strong economy means there will be few bankruptcies.

Taken together, your investment mix should continue to support the goals in your personalized financial plan.

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