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The Main Takeaways from Trump’s Tax Plan as Congressional Battle Looms

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Following months of speculation, Republican leaders officially unveiled a plan Wednesday to rewrite the U.S. tax code. The ambitious framework matches or comes close to matching President Donald Trump’s campaign promise to reduce taxes on businesses and individuals.

The proposed plan, which aims to lower taxes on corporate income and simplify individual income tax brackets, is expected to make its way through Congress in the coming months. According to analysts, that’s where the real challenge starts.

For starters, Congress hasn’t approved a tax rewrite this ambitious since 1986. Secondly, the Trump camp has struggled mightily to earn lawmakers’ support around healthcare reform and other controversial reforms. This is likely to continue as the tax debate heats up.

Main Takeaways from the Trump Tax Plan

The plan shaves $2.2 trillion from federal coffers.

The GOP framework aims to reduce taxes by $5.8 trillion over a decade, according to the nonpartisan Committee for a Responsible Federal Budget. The program will raise $3.6 trillion via new revenue streams, for a net cut of $2.2 trillion.

President Trump is confident that the decline in revenue will be offset by faster economic growth. The new tax provisions, combined with deregulation and fiscal stimulus, is expected to produce annual growth of 3% or more for the foreseeable future. That is, once the plans are up and running.

It’s good for the wealthy. 

Not only does the Republican plan shave off a few percentage points off the top income bracket, it repeals the estate tax. It also includes the elimination of the 25% alternative minimum tax, which is the rate applied to businesses that pay taxes on their owners’ individual returns.

That being said, the GOP plan leaves an opening for a fourth income tax bracket above 35%, which would apply to very high earners. The current proposal reduces individual tax rates to just three brackets set at 12%, 25% and 35%.

It may offer relief to lower- and middle-income households.

The framework also benefits lower- and middle-income earners by doubling the basic standard deduction to $12,000 for individuals and $24,000 for married couples.

However, current law provides married couples with two children tax exempt status on the first $28,900. That’s because of the personal exemption and standard deduction standards currently in place. In this case, the $24,000 deduction under the Trump plan would be smaller than the relief they get under the current framework.

It conceals as much as it reveals. 

Though still in its formative stage, the GOP plan offers scant details about important business taxation issues. Although Trump is sticking to a 20% corporate tax rate, versus 35% today, nothing is mentioned on non-corporate business. This impacts real estate, agriculture and private-equity firms.

Although the plan talks about a reduce rate on international business, it doesn’t really offer much incentive for multinationals to repatriate. According to analysts, the draft framework suggests corporations would be subject to minimum tax on foreign income (they are opposed to this).

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 738 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Market Overview

Hit the Road Jack

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Hi Everyone,

Never thought I’d be writing an obituary for the founder of one of the largest asset management firms in the world, but Jack Bogle was one of the good guys.

He was always looking out for the little guy. Back in the 70s when the financial markets was an even more closed nit racket than they are today, Bogle introduced the first index funds as a tool for individual investors to reduce risk and fees. At that time the idea was laughed off as ludicrous but it soon became the industry standard saving average joes billions, probably trillions of dollars over the last half century.

Though he wasn’t too fond of bitcoin, he probably would’ve appreciated the HODL ethos. Bogle firmly believed that stock picking and day trading was a terrible long-term strategy. So he advocated strongly that people should ignore short-term movements of the markets and simply stay the course of their investments.

Our generation could certainly use someone like him. So long Jack!

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Shutdown: Day 27 | Days to Brexit: 71
  • Global Uncertainty at Record Levels
  • Cryptos are Cool as a Cucumber

Please note: All data, figures & graphs are valid as of January 17th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Our two headline issues are no closer to being solved today. Washington DC remains in gridlock and the UK is back to square one. Stock indexes are declining today but not by much. Despite all the geopolitical and economic uncertainty, there are still some screaming BTFD!

Cramer’s call comes after an astonishing 4th quarter earnings report from Goldman Sachs, which turned out to be their best earnings reaction since 2008. Check out that fantastic floating marubozu daily candle yesterday.

Aside from GS, the banker’s earnings were rather pretty solid with some hitting and some missing their marks but overall good vibes. Not all is peaches in cream in the markets though, as is evidenced by the Global Economic Policy Uncertainty Index, which is now at its highest level since inception.

Netflix Earnings

The first of the FAANGs will be reporting tonight after the closing bell. I must say, out of all the top tech stocks on Wall Street, NFLX was probably hit the hardest by the recent stock market declines, but it was also the quickest to recover.

This graph shows all the FAANG stocks, with Netflix in white.

Famous eToro stock trader Wes Nolte says that he’s closed out some of his positions in preparation of this announcement as it could be the bellwether that affects the wider market for the next few days.

Cryptos Keep Cool

Despite the apparent volatility in the stock markets and general air of uncertainty depicted above, the crypto markets remain steady as a rock.

It’s already Thursday and many cryptoassets have moved less than 3% since the start of the week.

In fact, the crypto markets so far this year have become increasingly apathetic to what’s happening in the rest of the financial markets. This graph shows that the short-term correlations between bitcoin and gold, the US Dollar, and the stock markets have all moved to near zero. They just DGAF.

Many thanks to everyone for reading and for increasingly sharing your thoughts, insights, opinions, and well thought out questions with me on social media. Let’s have an awesome day!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan Twitter: @MatiGreenspan LinkedInMatiGreenspan |Facebook:MatiGreen

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 142 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

U.S. Stocks Rise on Solid Bank Earnings; Cryptocurrencies Look for a Catalyst

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U.S. stocks continued higher on Wednesday, with the Dow rising triple digits after a blowout earnings report from Goldman Sachs. Cryptocurrencies were mostly directionless after Ethereum delayed its planned Constantinople upgrade due to security risks.

Stocks Rise

All of Wall Street’s major indexes finished in positive territory. The Dow Jones Industrial Average climbed 141.57 points, or 0.6%, to 24,207.16. The broad S&P 500 Index advanced 0.2% to 2,616.10, with financials leading the way higher. The Nasdaq Composite Index recorded a gain of 0.2% to finish at 7,043.70.

Goldman Sachs Group Inc. (GS) was the Dow’s best performer after reporting much better than expected earnings and revenue for the fourth quarter. The investment bank reported per-share earnings of $6.05 on revenue of $8.08 billion. Analysts had called for an EPS of $4.45 on $7.55 billion in sales.

Bank of America Corp (BAC) also rose after reporting a better than expected quarter. The bank beat expectations on the top and bottom lines and tripled its profit to $7.3 billion.

Brexit Uncertainty

Global financial markets were surprisingly calm in the wake of a devastating Brexit vote for British Prime Minister Theresa May, who failed to pass her proposed legislation on Tuesday. Lawmakers voted overwhelmingly against the proposed Brexit deal, setting the stage for a new round of negotiations with Brussels.

However, some members of British Parliament want Prime Minister May to step down or call a general election. The opposition Labour party pushed for a vote of no-confidence on Wednesday, which if passed, would have set the stage for a general election. The motion was rejected late Wednesday.

Under May’s proposed deal, the United Kingdom would embark on a soft Brexit in roughly two months’ time. It’s not entirely clear whether that timetable is still feasible given the latest setback in parliament.

Day 26 of the Government Shutdown

The longest government shutdown in U.S. history entered its 26th day on Wednesday, fueling uncertainty about the direction of the economy. With roughly 800,000 federal workers affected by the impasse, some analysts are beginning to worry about the potential impact on economic growth.

The latest Quinnipiac poll shows the majority of Republicans still support the shutdown because of its implications on border wall funding. President Donald Trump has been adamant that he will not cave unless Democrats make appropriations for a steel barrier on the U.S.-Mexico border. The president has warned that the shutdown could go on for “months or even years” if Democrats don’t agree to fund the wall.

With no solution in sight, attention has turned to Senate Republicans, some of which have grown frustrated with the shutdown. If enough of them defect, it could force a vote on a new measure to re-open the government.

Ethereum Hard Fork Postponed

The planned implementation of the Constantinople hard fork was delayed on Wednesday after developers identified a major vulnerability in one of the Ethereum Improvement Proposals (IEPs).

Smart contract auditor ChainSecurity on Tuesday uncovered a major issue with EIP 1283, which proposes net gas metering changes for the SSTORE opcode and new uses for contract storage. According to ChainSecurity, implementing the EIP 1283 would give attackers a loophole to steal funds.

The delayed launch of Constantinople was made official on Ethereum’s official Twitter: “Constantinople upgrade is temporarily postponed out of caution following a consensus decision by #Ethereum developers, security professionals and other community members. More information and instructions are below.”

At the time of writing, no alternative timetable has been provided. More on Constantinople: ETH/USD Price Analysis: Ethereum’s “Thirdening” Approaches.

Crypto Markets Gyrate

The cryptocurrency market saw little movement on Wednesday, as bitcoin held within a narrow range and most of the major altcoins exhibited lower volatility. The value of all coins in circulation dipped slightly to $121.6 billion despite the presence of stable volumes.

Bitcoin edged down 0.1% on the day, reaching $3,642.89. The largest cryptocurrency by market cap experienced a large bounce at the beginning of the week but has faced strong resistance near $3,700.

Learn why we believe 2019 could be the year of accumulation for bitcoin.

Ethereum had posted the biggest percentage drop in the top 20 before paring losses later in the session. EH was last down 0.6% at $122.86.

On the opposite side of the spectrum, Cardano gained 4.2% to $0.0445. Binance Coin rose 3% to $6.10. EOS added 1% to $2.43.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 738 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Market Overview

Bitcoin in Backwardation (this is fine)

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Bitcoin Options

Hi Everyone,

One of the joys of having a futures market is the ability to understand what investors are thinking about the future of the price. For bitcoin, it doesn’t seem so great at the moment.

As we can see, the contracts for the bitcoin futures on the CBOE are currently in backwardation, meaning that contracts with a later expiration are trading consecutively lower.

Of course, something like this might have made me nervous on a normal day, but then I remembered that oil futures were trading in contango (opposite of backwardation) before the prices collapsed back in October.

Also, the volumes here are kind of silly. I mean, 227 BTC (less than $1 million) trading on a contract that expires today. Sure, the title is catchy but what can we really learn from this?

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Shutdown: Day 26
  • Day’s to Brexit: 72
  • Constantinople Delayed

Please note: All data, figures & graphs are valid as of January 16th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

You may have noticed that we’re now including a countdown to Brexit in the highlights section, right next to the US government shutdown counter. I think they fit together neatly. Two governments descending into a state of turmoil over political wrangling.

Today, Theresa May’s government will see the ultimate test. If she loses the vote of no confidence, the UK heads to new elections… again.

Over in the East, China decided to inject the market with a record level of stimulus. Yesterday’s tax cuts may have been insufficient to maintain growth, so they’ve gone the route of free cash for the market.

In addition, it seems the Institue of International Finance has made a rather shocking estimation. It seems our entire economic system, from our homes to places of work and our governments are increasingly reliant on debt.

Given all the above, it’s no wonder that the European Central Bank is now sounding a new alarm.

Don’t worry about any of this though. The stock markets are up today. Hope the earnings reports from the financial sector go well.

Ethereum Upgrade Delayed

After all the excitement, the crypto community was disappointed to hear last night that the long-awaited Constantinople upgrade has been delayed once again.

It seems a critical bug was found at the last minute and the lead developers pulled the plug. Here we can see the crypto market, led by Ethereum, dropping moments after the announcement was made

We’re seeing a bit of a recovery this morning but that was really scary. I mean, it’s good that they caught the bug before going live but the fact that it came within 30 hours of the upgrade is a bit nervewracking.

These things do happen, virtually all major platforms including Windows, Android, and Apple Operating systems, have seen critical bugs before. Though it would be possible to release a patch, fork the network again, and return to normal, that kind of process could in itself have done irreparable damage.

We hope that Constantinople whenever it is ready, goes through without any additional hitches.

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan Twitter: @MatiGreenspan LinkedInMatiGreenspan |Facebook:MatiGreen

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 142 rated postsSenior Market Analyst at Etoro.com.




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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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