All Signs Still Point to an Increase in the Corporate Business Tax
The political back-and-forth on tax increases isn't likely to change the outcome.
Back in April, we laid out our expectations that, as part of a major infrastructure package, Congress would raise the corporate business tax rate from the current 21% rate, with a probability-weighted average of an increase to 26%. We also predicted that such an increase would deliver mid-single-digit impacts on average equity valuations.
Despite some reporting that the infrastructure package may be significantly altered, we stand by our view: Democrats have a strong incentive to go it alone if they cannot get Republican support, and they cannot get sufficient Republican support for a regular order bill. Therefore, we think the final package will be similar to what Biden proposed, particularly with regards to the tax increase.
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