On the Odds of Tax Reform

October 14, 2005

What are the chances Congress will enact fundamental tax reform? Not good, according to those placing real bets in U.S. financial markets. From Forbes:

Many economists, for example, argue that the total exclusion from tax of employer-paid health insurance and the generous tax breaks for homeownership inflate demand and prices in those sectors. Yesterday, the president’s panel publicly toyed with limiting both of them–perhaps capping the health insurance exclusion at $11,000 an employee and limiting the deduction for mortgage interest to as little $350,000 in home-acquisition debt, down from the current $1 million.

Stocks of home builders such as Toll Brothers, Pulte Homes and D.R. Horton, already hurt by Fed tightening, didn’t react. The smart money, it seems, is still betting against tax reform.

In addition to this nugget of economic wisdom, the Forbes piece is chock-full of smart analysis of the current tax reform debate. Check out the full piece here.

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