By Terry Connelly, Dean Emeritus, Ageno School of Business – Golden Gate University
Just revealed in his speech to Congress, the issue of whether the corporate tax reduction will include a “border adjustment tax” on goods imported to the United States has been mesmerizing stock market analysts – if not most investors, who have driven the market up to record highs this year – for the past couple of weeks. Maybe investors know the answer or think they will like it; investors usually dislike uncertainty intensely, but for the moment they are whistling past this known unknown.
Corporate America would like an answer, soon, and has been showing their seriously divided views on this issue in the media and their well-publicized meetings at the White House with the president and his economic advisors. Business people dislike policy uncertainty even more than investors do, especially when it comes to tax planning as they work through the usual winter budgeting exercises for their next fiscal years.
… the Trump Administration and Congress, who together now own both their promises and the economy, must somehow resolve those contradictions…if they want to actually get anything accomplished on taxes and the economy.
Members of Congress (especially in the majority Party) are equally on pins and needles on this issue, in part because the GOP leadership in the House of Representatives is lock-step committed to the “border adjustment tax” as a key part of their tax plan, while the Party leadership in the Senate has, to put it charitably, been “keeping its options open” — as is the Trump White House. For the erstwhile “Party of Business,” the problem is that “Business” is as intensely divided on this issue as most of America is on what to do about immigration – and how’s that divide working out for us?
So what’s it all about, Alfie? It’s about the inherent contradictions in the overall tax promises that Trump campaigned on, and pulled in not only himself but also GOP majorities in both Houses of Congress. And it’s about how the Trump Administration and Congress, who together now own both their promises and the economy, must somehow resolve those contradictions (which you can get away with in a campaign but not for long in governing) if they want to actually get anything accomplished on taxes and the economy.