President Trump recently announced his tax reform proposals, which included among others, the repeal of the estate tax, repeal of the alternative minimum tax, reduced income tax rates, and special rates for pass-through entities, such as partnerships. Offsetting proposals are aimed at eliminating the deduction for state and local taxes and certain itemized deductions. Candidate Trump proposed replacing the estate tax with a capital gain tax recognition system, like exists in Canada. See Trump Era Tax Reform. Also, Republican Congressman have recently backed-away from repeal of the estate tax in order to secure greater tax reduction from the middle class, claiming “the estate tax can be avoided [to a great degree] with proper estate planning. Coincidentally, on October 2, 2017, the Dept. of Treasury killed proposed regulations that were aimed at eliminating the estate tax reduction benefits of family partnerships. The Senate’s adoption of a budget by a 51-49 party line vote sets tax reform in motion.
How growth is managed and the impact fiscal stimulus has on inflation are at the forefront of the minds of economists and market prognosticators. The Fed is concerned with increasing wage pressures, but inflation remains subdued. The Federal Reserve saw modest to moderate growth in the latest Beige Book. The report depicts tightening labor markets, while businesses struggle to pass along higher prices. The U.S. productivity increased but only with modest inflation from September through early October. So, why is the Fed set on increasing rates? The view by some is that it sees excessively high prices in stocks and other financial markets. See Market Valuation Metrics . Thus that view suggests, “the Fed will attempt to engineer a soft landing of asset prices and will continue to raise rates in the face of softer economic data.”
Link: Market Valuation Metrics