The Dow Jones Industrial Index fell by more than 200 points Thursday after reports that GOP senators plan to delay a massive corporate tax cut until 2019.
The Dow was down more than 220 points within one hour of The Washington Post reporting that the Senate GOP tax-overhaul bill would delay cutting the corporate tax rate for two years. That’s less than 1 percent of the Dow Jones Industrial’s value, which stood at 23,492 when the day began.
The House, Senate and Trump administration are united behind cutting the corporate tax rate from 35 percent to 20 percent. But House leaders and President Trump have called for an immediate tax cut,
Senate leaders delayed the corporate rate to give themselves $100 billion in savings to address other concerns with the plan. The Republican budget gives lawmakers room to make $1.5 trillion in tax cuts over ten years without violating rules that would allow the tax bill to pass with 51 votes.
Republicans are dedicated to a massive tax cut for corporations, arguing it would make U.S. businesses more competitive globally and boost economic growth. But delaying the corporate tax cut could prompt businesses to hold off on key investments or decisions until they’d be taxed at a lower rate. That could exacerbate budget deficits and stifle the U.S. economy.
The downturn shows how much Wall Street has invested in a successful GOP tax package. Stocks have soared past historic highs since Trump’s election, expecting to benefit from massive tax cuts and deregulation.
Trump has frequently bragged about the performance of the stock market during his presidency, taking credit for the sweeping gains.
Some economists, regulators and even Trump administration officials have warned that Wall Street’s high expectations for tax cuts could harm the economy if markets have to correct for a failed package.
Treasury Secretary Steven Mnuchin said last month, “There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done.”
“So I think to the extent we get the tax deal done, the stock market will go up higher. But there’s no question in my mind if we don’t get it done, you’re going to see a reversal of a significant amount of these gains,” he added.