As Tax Cuts Go, So Go Stocks

 

When markets closed Friday, stocks finished with their first down week since September—and you can blame it on tax cuts.

On Thursday, Senate Republicans unveiled their own tax cut plan a week after their counterparts in the House released their blueprint. (I’m calling it a “tax cut” plan, because that’s what it is, not tax “reform,” which, as in 1986, entails a much deeper change.)

The Senate plan preserved most of the essential features of the House’s, especially a new, permanent statutory corporate tax rate of 20%. (It’s now 35%, although the rate companies actually pay is much lower.)

But there was a big “but”: The Senate Republicans’ plan delayed that rate cut until 2019, one year later than the House bill’s start (based on the optimistic assumption Congress acts like a real legislative body and passes the bill by next year).

That was enough to throw markets into a mini-tizzy. The S&P 500 fell 12 points from its Wednesday all-time closing high near 2,600, while the Dow Jones Industrial Average is off roughly 140 points from its own closing peak. Both fell slightly on the week.

Are stock prices that closely tied to tax cuts?

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