It seems the more turmoil and dysfunction there is in Washington, the higher odds Wall Street gives tax legislation.
Last week may have been one of the worst of the Trump presidency with President Donald Trump coming under a firestorm of criticism for his reaction to the deadly protest in Charlottesville, Virginia. Corporate CEOs abandoned him, quitting his advisory councils and there was speculation respected aides and Cabinet members would leave him.
Out of the chaos has come a view about what might get done in Washington this year — and that's corporate and individual tax legislation, according to notes from multiple Wall Street strategists. A tax code overhaul was a cornerstone of Trump's policy agenda, and a major goal of congressional Republicans, but optimism for a sweeping plan has faded.
"Tax reform is not going to happen, but tax cuts are going to happen," said Tobias Levkovich, chief equity strategist at Citigroup. Instead of slashing the corporate tax rate to the 15 or 20 percent proposed by the president and House Republicans, he said the rate might be more like 25 percent, from the current 35 percent. The average S&P 500 company pays just a little more — about a 27 percent average tax rate — but the tax cut would still be a positive for Republicans, Levkovich said.