Wall Street likes it, but most Americans disagree with cutting corporate taxes

Key Points
  • Breaks for companies outlined in the new tax reform plan are expected to help Wall Street but may not be so popular on Main Street.
  • Just 24 percent of those surveyed in a Pew Research poll say taxes on corporations and big businesses should be cut.
  • The plan calls for a reduction in the corporate rate from 35 percent to 20 percent.
Cashin: Concern over whether they can get tax plan through

Breaks for companies outlined in the new Republican-backed tax reform plan are expected to be unambiguously positive for Wall Street but may not be so popular on Main Street.

The plan, released Wednesday morning, calls for lowering the U.S. corporate tax rate from its current 35 percent to 20 percent. Other provisions allow companies to immediately deduct depreciation and to bring profits back from overseas at a reduced rate.

Experts assessed the proposals as ones that both corporate America and investors will appreciate.

"The market should like that there's such a focus on business tax cuts," said Greg Valliere, chief global strategist at Horizon Investments. "There's a lot of things they can't afford. I'd describe it as a wish list more than anything else."

It wasn't what everyone was wishing for, however.

Just 24 percent of Americans surveyed in a Pew Research poll released Wednesday say taxes on corporations and big businesses should be lowered. More than double that — 52 percent — believe they should be raised. Some 21 percent believe the rate should stay where it is.

Views on corporate taxes split along party lines — 69 percent of Democrats and independents leaning the party's way want corporate taxes raised, while the GOP side has 41 percent saying those rates should be lowered.

Commuters in a subway station in New York.
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Across all ideologies, a mere 24 percent say taxes on the highest earners should be cut, while 43 percent think they should be raised. The GOP plan cuts the top tax rate for individuals to 35 percent while doubling standard tax deductions. The poll surveyed 1,893 adults.

Wall Street's perspective is bound to be different.

After all, the market rallied this year at least in part on hopes for tax reform, though the effort remained clogged in a Congress beset by infighting. Getting at least a liftoff for the plan raised at least some hopes for a deal to get done.

"This clearly is the beginning of negotiations, although it's worth noting that there's no legislative language. It's just a summary," Valliere said. "What the market cares about is the process of tax reform is still alive. ... This process is alive and could be quite positive for equities."

The market did stage a modest rally Wednesday as stocks added to what already has been a record-breaking year.

"From Wall Street's perspective I think it's about as good as can be expected," said Brad McMillan, chief investment officer at Commonwealth Financial Network.

However, McMillan also thinks Main Street should be happy with the plan as well. The standard deduction change will help households, though some areas will lose out by the elimination of the deduction for state and local taxes. However, what the final package looks like is far from certain.

"To some respect this is a trial balloon. It's a statement of intent," he said. "What the president would like to do and what Congress will actually are not necessarily the same thing."

WATCH: Sen. Baucus says there's still a lot of work to do on tax reform.

Max Baucus: This is just a framework, we have no idea what the tax legislation might be