In our inaugural Wealth Management newsletter in February, 2017, we analyzed the President’s campaign platform and made predictions about the President’s legislative agenda. We checked our predictions in May and again in 2017. So now, one year later, how did the President do and how did we do?
- Health care. Health care might have been a recovered fumble. The attempt to outright repeal the ACA failed but in the Tax Cuts and Jobs Act in December, the individual mandate was repealed. The President has declared recently that he intends to pursue again the outright repeal of Obama care. In addition to the failure of the attempt to repeal the ACA, several other legislative priorities were sidelined, backtracked and became more difficult. We suggested the tax cuts legislation might have been a better first priority than repeal of the ACA - the money vs. lives argument - and the President’s tax cuts legislation likely took longer and was less comprehensive (though a win for the Administration) than contemplated.
- Tax Cuts and Jobs Act. As mentioned, the Administration views this as a win, and it is especially for corporations and individual taxpayers. In our May newsletter, we summarized the President’s April one-page memo for individual tax reform. No doubt the memo was highly ambitious, and therefore more of a wish list than pragmatic, we-can-do-this memo. For example, while tax relief was provided to individual tax payers, the legislation did not achieve the simplicity of reducing seven tax brackets to three. On the other hand, the standard deduction was doubled, as identified. Home ownership and charitable gift deductions were preserved, with some modifications (both the construction/home mortgage and the not for profit industries salvaged big wins here in view of the deficit challenges to their preservation). Some compromises were wins: e.g., the President’s goal of a 15 percent corporate tax rate was compromised to 21 percent; the President’s goal of a top individual tax rate of 35 percent was compromised to 37 percent, yet both of these were wins for the President. Now, the deficit hawks will challenge additional Administration legislation based on the impact to the deficit from the Tax Cuts and Jobs Act (see next paragraph).
- Infrastructure. The President’s Executive Order on infrastructure was a bit head scratching. It really cleared the way for process but the Administration chose not to introduce substantive legislation. Perhaps the Administration measured and chose wisely to hold infrastructure legislation until the passage of the tax legislation. The issue, though, is apparent. The Tax Cuts and Jobs Act has or will have an impact on the deficit – that’s inarguable. A fully funded $1 trillion infrastructure bill, the funding mechanism desired by the Democrats, is likely not achievable. The President wants a $200 billion funding from the Government and the remainder from the private sector. With corporate earnings theoretically anticipated to grow after the passage of the tax legislation, the Administration will be looking to the private sector to plow some of the anticipated earnings back into infrastructure projects. What incentives will be offered will be worth watching. As infrastructure needs are dramatic, the shape of the legislation will be highly interesting.
- Other domestic legislation – what to watch. Harkening back to the campaign platform, there are at least three other domestic issues the President may tackle: 1. Immigration/Dreamers Act/Build the Wall. This is so highly charged politically, it may remain rhetoric until (if there is) a second term; 2. Housing reform. Simply put, the President does not like the Government’s relationship with Fannie and Freddie; and 3. Welfare reform. See note to number 1.
One last point is to note that the Administration will continue to attempt to reduce regulation, whether by agency reduction/overhaul, executive order or by not funding or implementing. We’ll check back in our next installment for progress and accuracy!