JP Morgan AM: A US corporate tax cut would likely have a smaller impact than in 2016
US President-elect Donald Trump has proposed a cut in the corporate tax rate for domestic production from 21% to 15%.
During Trump's previous term, the broad corporate tax rate was reduced from 35% to 21%, boosting business investment and profits. The details of the proposed new cut are currently unclear, but if passed, it would likely have a limited impact on corporate earnings given it would only apply to US-based production.
Trump has also noted that firms which outsource, offshore or replace American workers would not be eligible. Only 18% of the companies in the S&P 500 by market cap derive more than 80% of their revenues domestically and currently face an effective tax rate of over 15%. Thus, the proposed cut seems unlikely to meaningfully reduce the overall tax burden on large US firms.
