Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Investors see Biden's 15% minimum tax offer as positive

Published 06/03/2021, 05:18 PM
Updated 06/04/2021, 06:05 AM
© Reuters. FILE PHOTO: A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

© Reuters. FILE PHOTO: A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

By Herbert Lash

NEW YORK (Reuters) -Investors hailed U.S. President Joe Biden's offer on Thursday to scrap his proposed 28% corporate tax hike as a move in the right direction and embraced the idea of a compromise that could allow an infrastructure and tax package to move through Congress.

Biden offered to set a minimum tax rate that companies should pay at 15%, two sources familiar with the matter said, in what would be a major concession by the Democratic president as he works to hammer out a deal with Republicans.

In return, Republicans would have to agree to at least $1 trillion in new infrastructure spending, versus the president's original proposal for a $2.25 trillion package.

"To set those rates at 15%, I think it would be great for the market," said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

Raising the global minimum rate on U.S. companies' foreign income to 21% from 10.5% and the corporate tax rate to 28% from 21%, among other Biden tax proposals, would slash earnings per share by about 7.6% next year, Morgan Stanley (NYSE:MS) said on Monday.

Headlines on Biden's proposal led the S&P 500 to trim losses by about half of 1%, though the market still closed lower.

Investors would welcome a compromise that allows the infrastructure and tax package to pass in Congress, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

"The alternative is the potential for a much more extreme package voted on only by Democrats," Meckler said.

Rob Sechan, managing partner and co-founder at Newedge Wealth in New York, said anything that is less than the expected 28% tax hike will help the market.

"The tax structure now has gone from headwind to a tailwind," he said.

© Reuters. FILE PHOTO: A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

A 28% corporate tax rate would have a huge impact on earnings, although the probability of a compromise is unlikely, said Thomas Hayes, chairman and managing member at hedge fund Great Hill Capital LLC in New York.

"There's a higher probability that Democrats push through whatever ...they want," Hayes said.

Latest comments

The 15% they pay has been received in stimulus anyway. Effectively 0% tax. Well.... the individual taxpayer has paid corporate tax, making rich people richer over the back of the working class
Funny how 15% is suddenly claimed to be positive 'by investors' when originally anything above 0% was really bad. One more twisted headlines where bad news are suddenly claimed to be good for market.
they'll use biased polling to justify their agenda as well
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.