NEW YORK, June 3 (Reuters) – Investors on Thursday welcomed US President Joe Biden’s offer to drop his proposed 28% corporate tax hike as a step in the right direction and adopted the idea of ââa compromise that could allow an infrastructure and fiscal package to go through Congress.
Biden has proposed setting a minimum tax rate that businesses should pay at 15%, two sources familiar with the matter said, in what would be a major concession from the Democratic president as he struggles to strike a deal with the Republicans. Read more
In return, Republicans are expected to agree to at least $ 1 trillion in new infrastructure spending, compared to the president’s original proposal for a $ 2.25 billion package.
âTo set these rates at 15%, I think it would be great for the market,â said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.
Raising the global minimum rate on foreign income of U.S. companies from 10.5% to 21% and the corporate tax rate from 21% to 28%, among other Biden tax proposals, would reduce earnings per share of about 7.6% next year, Morgan Stanley said. Monday.
Headlines on Biden’s proposal led the S&P 500 to cut losses by about half of 1%, although the market still closed lower.
Investors would welcome a compromise that would allow the infrastructure and the tax package to pass through Congress, said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
âThe alternative is the possibility of a much more extreme package voted only by Democrats,â Meckler said.
Rob Sechan, managing partner and co-founder of Newedge Wealth in New York City, said anything below the expected 28% tax hike will help the market.
“The tax structure has now changed from a headwind to a tailwind,” he said.
A 28% corporate tax rate would have a huge impact on profits, although the likelihood of a compromise is unlikely, said Thomas Hayes, chairman and managing member of the Great Hill Capital LLC hedge fund in New York City.
âThere is a higher likelihood that Democrats will push through whatever they want,â Hayes said.
Reporting by Herbert Lash, additional reporting by Caroline Valetkevitch and Lewis Krauskopf in New York and Shashank Nayar in Bengaluru; edited by Richard Pullin
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