We have reviewed the income tax bill released by the House Ways and Means Committee – titled Tax Cuts and Jobs Act. It is complicated with its 460+ pages being too voluminous to recount here. And, it will be changed as Congress goes hither and thither to finalize. Importantly, more likely than not, an income tax bill will be passed.

As to investment management, we do not see our investment research providers making any significant changes to their economic moat ratings or fair value estimates because of the income tax bill in its current form. We will continue to monitor its development.

The headline corporate tax rate proposed in the Tax Cuts and Jobs Act is 20%, lower than our current 25% assumption..However, many revenue-related parts of the tax reform bill have been scaled back from initial proposals. For example, the latest bill allows the partial deduction of mortgage interest and property taxes. These alterations mean the current bill would likely raise federal debt levels more than many had initially projected. To attain the votes of spending hawks, the aggressiveness of the bill may have to be scaled back. The overall corporate tax rate remains a key lever for negotiation, as effective tax rates truly determine the competitiveness of the U.S. relative to other countries. Industry groups will certainly push to keep their tax credits, and to the extent these credits lower effective tax rates, a modestly higher headline rate can keep the U.S. competitive with other countries.