Trump, GOP ‘Phenomenal’ Tax Plan Leaked: Here Are The Details

Earlier this month, Paul Ryan (among others) promised that something was coming on tax reform by the end of the month.

You’d be forgiven for being skeptical. After all, the President and the GOP have been making promises about “big league” tax reform since February 9th when Trump, seemingly without consulting anyone, told a gathering of airline CEOs that America could expect something “phenomenal on taxes” within “two to three weeks.”

It wouldn’t be until late April when we got a peek at what “phenomenal” looks like and as it turns out, it looks a lot like something that would have walked out of a high schooler’s Trapper Keeper: bullet points, big font, wide margins, double-spaced. In case you’ve forgotten, here’s the “plan” Cohn and Mnuchin unveiled on April 26:

So yeah, Ryan’s suggestion that September 25 was the day that something concrete would be revealed was met with more than a few exasperated eye rolls.

If we’re looking at the calendar correctly, September 25 will come next week (assuming Trump doesn’t start a nuclear war that kills us all before then).

Well according to an Axios exclusive out moments ago, “President Trump and Republican leaders plan to cut the top tax rate for the wealthiest Americans to 35 percent and dramatically reduce taxes on big and small businesses.”

Courtesy of Axios, these are the leaked details (some of which are new and some of which are “confirmation” of earlier leaks) of the plan Ryan teased a couple of weeks ago:

The big change: The GOP leaders and the White House plan to cut the top tax rate for small businesses – known as “pass-throughs” – from 39.6 percent to 25 percent. (Currently small businesses pay the same tax rates as individuals, and this puts them at a disadvantage to larger corporations, which pay lower rates.)

The details, per three sources with knowledge of the plan:

• Top individual tax rate cut from 39.6 to 35. The current seven income tax brackets collapsed to three, as part of simplification. (Axios hasn’t obtained the other two rates.)
• Axios can confirm that the Big Six agreed to cut the corporate tax rate from 35 percent to 20 percent. That key detail leaked last night to the Washington Post. (Trump has said he wants the corporate rate to be 15 percent.)
• The Big Six framework is also expected to include guardrails to prevent wealthy people from artificially lowering their income taxes by rearranging their affairs to get taxed at the small business rate.
• We can confirm, too, WashPo’s reporting that Republicans plan to double the standard deduction – a boost for the middle class and a key component of simplification.

These Big Six decisions have been held incredibly tightly, but details began leaking out around Capitol Hill on Friday night and the corporate rate was first published by the Washington Post’s Hill team. By Saturday, influential figures on K Street were beginning to learn more details.

The so-called “Big Six” tax framework – named because it’s been hashed out behind closed doors between six top Republicans and administration officials – will set up a clash with Democrats over the tax breaks that apply to large corporations and upper income Americans.

What’s next: President Trump is planning to give a speech unveiling the Big Six framework in Indiana on Wednesday, three sources said. The framework is the starting point for the tax reform process. It reflects the shared view of the Big Six, but it will inevitably change substantially as it goes through the normal legislative processes in the House and Senate.

So there you go.

Will this be enough to extend the dollar rally and push yields up further? And if so, what will that mean for an EM complex that came out relatively unscathed after a week that saw the Fed maintain its near-term rate path?

Oh, and as Axios also notes, this “will set up a clash with Democrats over the tax breaks that apply to large corporations and upper income Americans.”

But that’s ok, because “Chuck” and Nancy are Trump’s new besties.