US: Tax cuts still possible despite failure to repeal Obamacare - Wells Fargo

Analysts from Wells Fargo, still expect the tax cut to materialize in the US, despite the recent failure of the Trump administration in the Senate to repeal and replace Obamacare.

Key Quotes: 

“At the start of the year, there were three large agenda items that the Trump administration and Republican members of Congress sought to tackle: repealing and replacing the ACA, enacting sweeping tax reform and passing an infrastructure package. With the failure of the ACA repeal and replace effort, we see Congressional Republicans moving on to the other two agenda items.”

“We have maintained the view since January that there is no path forward on a major infrastructure spending plan given the difficulty in finding funding for such an endeavor. That leaves tax reform as the policy area to which we see Congressional Republicans turning next.”

“In recent days, commentators have suggested that since Republicans have been unable to coalesce around a solution to repeal and replace the ACA, this signals a reduced probability that tax cuts will take place. In our view, the fact that Republicans have yet to score a major legislative victory on their top three agenda items puts greater pressure on Republican members of Congress to record a major legislative achievement before midterm elections in November 2018. Although we see tax reform as the next major topic to be tackled by Congress, the policy specifics are not expected until later this fall.” 

“There are a number of legislative deadlines in September that will consume the attention of policymakers, such as the need to lift the debt ceiling, confirming President Trump’s nominees and reauthorizing several federal programs, all of which are separate from clearing a funding bill to
keep the federal government operating beyond the end of September. It is only after these must-pass items are taken care of that we expect more significant progress on taxes.”