On Thursday the House of Representatives passed the Tax Cuts and Jobs Bill by a surprisingly decent margin of 227-205, and for a day at least investors cheered.
The Dow Jones Industrial Average gained 187 points Thursday while the S&P 500 tacked on 21 points as investors celebrated the long-awaited milestone. Senate Majority Leader Mitch McConnell promised to put that body’s version of the legislation up for a vote after Thanksgiving.
The plan would permanently slash corporate tax rates to 20% from the current 35%; reduce the number of tax brackets; eliminate personal exemptions while doubling the standard deduction and child tax credit; cut rates for some “pass-through” businesses, and end the alternative minimum tax and phase out the estate tax.
To recoup enough projected revenue losses to get the bill through the Senate, the House plan ends deductibility of state and local income taxes and caps the amount taxpayers can deduct for medical expenses, mortgage interest, and property taxes.
But the big deal here for investors (and big political donors, who pushed Republican congressmen hard on this bill) is the corporate tax cut, which was on a percentage basis the largest we’ve ever seen.
Here’s why so much is riding on it.