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Concerning tax plans of the phenomenal variety

So we haven't talked much about tax policy yet (don't worry, we will). And we don't like to take cues from the market or talk too much politics. But, I think it's of note that Trump's assurance that his "phenomenal" tax plan is almost ready caused markets to jump on the expectation of higher US growth.

No details of any kind about the plan were given. But Representative Kevin Brady (Chairman of the tax-law-writing Ways and Means Committee) assured us that "We're going in the same direction in a good way.". Color me skeptical about the whole thing. Three questions come to mind:

1. Will the administration present a "tax plan" in the next 60 days?

Trump said in the next three weeks, but we'll give him some breathing space. Even with 200% more time, it seems especially unlikely that he will be able to put a plan together. I'm reminded of the Obamacare replacement, which was promised to be "on day 1" during the campaign, because Obamacare was a disaster and fixing it was simple. But now, it probably won't be until 2018 - if at all.

Tax law is super complex. And there are a few key points that this group has been saying about the tax policy over the last 18 months:

  • Lowering corporate rate to around 15%, and encouraging repatriation through a one-time amnesty

  • A "simpler code," with 4 brackets (lower than the current ones) offset with fewer deductions

  • The "Mnuchin Rule" - "no absolute tax cut for the upper class"

  • Elimination of the estate tax

Any plan would also have to be revenue neutral: Trump has both made it his official position and it is necessary to get such a plan through through the Senate. It is very difficult eliminate enough "deductions" and "loopholes" to get the math to work. Home-mortgage interest and local/state tax deductions? Gone. Employer health-care deduction? Gone. A lot of corporations who use deductions to pay less than 15% today? Will fight it tooth and nail. By definition, in any revenue neutral tax plan, if some people pay lower taxes, others will have to pay higher taxes. I can't picture this crew telling half of the country that their tax bill is about to go up.

LobbySeven Odds: 5 to 1 against

2. If such a plan is suggested, can it pass congress?

Let's tell the story of Representative Dave Camp. Camp, a Republican from Michigan, was chairman of Ways and Means before Rep. Brady. He was an honest believe in tax reform; he spent years working to come up with a plan, famously working with Senator Max Baucus (D-MT), his rough counterpart in the Senate. In 2014, he presented what was universally considered a "serious plan." In this way, it stood in specific contrast to several plans produced by Rep. Paul Ryan whose numbers never added up. The document itself was long and complex, which is a requirement for any attempt to really change the fundamentals of the code. But it basically met all of the Trump requirements and was within spitting distance of revenue neutral. So what happened?

He was pilloried. By everybody.