With two tax reform proposals currently on the table, House and Senate Republicans are in the midst of a major push to cut taxes and reform the U.S. tax code. According to Moody’s Analytics, both proposals would significantly add to the federal deficit, while failing to produce any meaningful increase in long-run economic growth. Businesses would be the primary beneficiaries of the proposed tax reforms, and many wealthy individuals would disproportionately benefit from the proposed changes. The planned reforms are stimulating stock prices, given the anticipated increases in after-tax earnings. But both plans would sharply reduce, if not eliminate, mortgage interest rate and property tax deductions – a particularly onerous change for homeowners in high-cost housing markets.
Whether or not the proposed reforms, along with the purported economic growth resulting from them, come to fruition, it is difficult to argue that additional economic stimulus is necessary, at this point, given the U.S. economy’s continued performance. Consumer confidence is at 17-year highs, supported by continued stock market gains and healthy job creation, with the economy approaching full employment. Residential and commercial real estate market conditions remain solid, and the still-accommodative interest rate environment drives continued investment.
Source : CBRE Global Investors