In a 51-49 vote, the Senate passed the new tax code by a narrow margin for the United States on Dec 1. This brings President Trump closer to tax reforms in the United Sates. Members of the GOP cleared a big hurdle after dissentient senators agreed to approve the Bill. Now that the Bill has cleared the Senate, lawmakers are seeking to settle disparities between Senate’s version of the Bill and the one passed by the House last month, before it is presented to Trump.
A slash in the corporate tax rate from 35% to 20% and Trump’s one-time tax repatriation mean that large-cap companies would greatly benefit from such policies. Under such conditions, it would be prudent to invest in large-cap mutual funds.
Highlights of Tax Bill
Though the Senate passed the Republican Tax Bill by a narrow margin, this victory takes Trump closer than ever to delivering on the “promise” that was the cornerstone of his campaign — a new U.S. tax code.
The Bill permanently slashes the corporate tax rate to 20%. Further, the tax repatriation provision allows big companies with global operations to bring back trillions of dollars held as cash reserve overseas. Finally, the Bill repeals the individual mandate of Obamacare in a bid to provide the citizens of the United States the freedom to choose from a variety of health plans and relieve them of the penalty for not having a health insurance.
Who Are the Likely Gainers?
A cut in domestic tax rates would mean that banks and big financial institutions that are weighed down by a hefty tax load would benefit greatly. Moreover, Trump’s one-time tax repatriation policy is likely to improve the overall financial health of tech, drug and biotech companies. Such a tax holiday would allow large-cap corporations hoarding trillions of dollars held as cash reserve overseas to bring back profits for one-time tax.
Let us not forget that tech behemoths Apple, Alphabet, Microsoft, Cisco Systems, Inc. (CSCO) and Oracle (ORCL) hold 88% of their money overseas to avoid paying the 35% corporate tax rate on earnings. Thus, they are positioned to gain immensely under Trump’s tax reduction plan. Companies like Hewlett Packard Enterprise Co (HPE) and QUALCOMM, Inc.’s (QCOM) earnings are also projected to rise around 20.8% and 10.5%, respectively, on a repatriation tax cut, per Strategas Research Partners.
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