The Wall Street Journal reports on one unexpected market adjustment to the GOP’s promised corporate tax cut:
The possibility of a tax-code overhaul is casting a shadow over the $10 billion affordable-housing industry, which receives tax credits so valuable they often determine whether or not projects get off the ground.
Members of Congress and President Donald Trump have proposed reducing the corporate tax rate to 15% to 20% from the current 35%, dimming the allure of a credit investors such as big banks and insurance companies receive to offset income taxes. Affordable housing, which represents about one-quarter of all new apartment construction in the U.S., relies on the credit for capital.
Overall, this reallocation of capital is a good thing, not a bad thing. The pullback illustrates one of the many ways the tax code saps the vitality out of the economy encouraging people to invest in order to produce tax savings rather than to produce goods and services in greater need. Lowering rates will make investments more efficient and productive.
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