The final vote to push through U.S. tax reform appears to be a mere formality, even with Republican Senator John McCain set to miss the vote due to health complications. The last few holdouts, Senators Bob Corker and Susan Collins, have fallen in line with the rest of their party.
The final draft that emerged from the negotiations between Senate and House Republicans had some minor changes to the original bill. The top tax rate for individuals will drop from 39.6% to 37%. The corporate tax rate will decrease from 35% to 21%. Some analysts have estimated that this could increase corporate revenues by over $6 trillion over the next decade.
Analysis from Goldman Sachs Group Inc. projected that tax reform would be a significant boon to the big U.S. banks. Its earnings per share estimates increased by 13% on average if the corporate rate is dropped to 21%. Goldman Sachs also projected positive results from the repatriation rate of assets held overseas for banks. Banks and other companies will be subject to a one-time tax on liquid assets of 14.5% and a 7.5% tax on illiquid assets.
Investors who want to take advantage of the possible earnings bonanza for U.S. banks should look at the BMO Equal Weighted U.S. Banks to CAD ETF (TSX:ZUB). The ETF offers a hedge with the Canadian dollar continuing to show weakness into the last weeks of 2017. It was up 1.11% in early afternoon trading on December 18 and has climbed 16.9% in 2017.
