Goldman Sees 50-50 Chance of Tax Reform This Year

Goldman Sachs sees greater than 50 percent odds that a tax bill will be enacted this year and 80 percent by early next year.

The Senate Budget Committee was expected to vote on the bill later Tuesday, and there are expectations the bill would pass the full Senate by the end of the week. But GOP leadership continues to work on wrangling several senators who have concerns about the deficit and other aspects of the bill, including Sen. Bob Corker and Sen. Ron Johnson, both on the budget committee.

Goldman’s economics team said a final agreement between the House and Senate could become law by December if the Senate modifies its version to be more in line with the House on the issue of property taxes. Both bills take aim at ending deductions for state and local taxes, an issue for high-tax states like California, New York and New Jersey. The House bill allows for a deduction for up to $10,000 in property taxes.

The question is how quickly the bills can progress. “If Senate passage slips beyond this week, enactment by year-end will become more difficult, in our view,” the Goldman economists wrote.

Cowen political analyst Chris Krueger sees the same issue of property taxes as an important sticking point, and if that is modified, the House could vote on the Senate bill this weekend. But Krueger is skeptical that Congress will even approve a tax bill. It also has to take up a spending bill before the end of the session.

“Any slippage and momentum goes [the] other direction with Alabama Senate election and shutdown negotiations next week,” he wrote in a note. Alabama voters go to the polls Dec. 12 to elect a new senator, and the Republican candidate has been weakened by accusations of unwanted sexual advances against teenagers.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza