US: Voting on tax proposals by Senate expected - BBH
In a vote along party lines, the US Senate Finance Committee approved the tax proposals, setting the stage for a vote by the entire Senate as early as tomorrow, notes the research team at BBH.
“It promises to be a close vote. The price of securing some Republican Senators has been to agree to some automatic tax increase if revenues fall short of what is projected appears to be alienating others. The trigger that has reportedly been agreed to is a 1% rise in the corporate tax rate if revenues fall short after five years. Other Senators seem to be balking at the idea of being locked into tax increases in what could be adverse economic conditions, like a recession. Others seem to object because it injects unnecessary uncertainty.”
“The Republicans have a 52-48 majority in the Senate. They can afford to have two defections (with the Vice President then casting the tie-breaking vote). If the bill passes the Senate, the next step, which could begin next week, is to reconcile the House and Senate version. They are several important differences, but it is generally assumed a deal will be struck, even if the precise details are not known.”
“The US is expected to report an upward revision to Q3 GDP. It is expected to be helped by consumption and inventories. Growth may exceed 3.0% at an annualized rate for the second consecutive quarter and this quarter also looks to be tracking a little north of 3%. Pending home sales are expected to have recovered in October after a flat September.”
“Yellen appears before the Joint Economic Committee of Congress. Like Powell's confirmation hearing yesterday, we do not expect the new ground to be covered by Yellen today. Dudley speaks in the NY morning on the US economy. His views are already known, and he is optimistic on continued above-trend growth and rising inflation. The Fed's Williams speaks at lunch in Arizona, and Kashkari hosts a Q&A on Twitter late in the session.”