Some Wall Street pros see Congress’ tax plan as too much of a good thing

House Ways and Means Committee Chairman Rep. Kevin Brady (R-TX) is greeted by applause from (L-R) Rep. Kristi Noem (R-SD), House Majority Leader Rep. Kevin McCarthy (R-CA), and Speaker of the House Rep. Paul Ryan (R-WI) during an event at the Capitol to celebrate the passing of the tax reform bill November 16, 2017 in Washington, DC.

Both the Senate and House tax plan would cut corporate taxes by 20 percent, but they vary on the details. Congress’ Joint Committee on Taxation says each would increase deficits by $1.4 trillion.

The White House says the plans, which have many popular features, will boost growth, help small business and the middle class, and make American companies more competitive. The goal is to have a compromise package approved by the House and Senate and made law before the end of the year.

Citadel CEO Ken Griffin told CNBC Monday that while tax reform for individuals is helpful for millions of Americans, he questioned the timing of the package.

“We’re late in the business cycle, and to the extent this is a move that would be stimulative in nature you would usually reserve tax reform of this nature for right in the midst of a recession. So to the extent this represents fiscal stimulus, this is a latent business cycle move. It would be contrary to what you would traditionally do from an economic perspective,” he said.

But he added that tax reform is necessary. “Do we need to cut taxes as much as we are? Probably not. Do we need to reform taxes, simplify taxes, and keep America competitive? Absolutely,” he said. But he said the proposed 20 percent corporate tax rate from the current 35 percent may be too steep a cut, compared with the average mid-20s percent corporate tax rate for OECD countries.

BlackRock’s Rick Rieder agrees. “One man’s point of view: I think the corporate tax rate should be 25 or 27 percent,” said Rieder, global chief investment officer of fixed income, in a recent interview. “Along with direct expensing, a 20 percent corporate tax rate is too low because of the potential cost of doing it.”

The legislation includes a provision allowing companies to immediately expense 100 percent of capital expenditures. Strategas Research said that alone would boost the economy by 1 percent next year.

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