US tax cuts not likely this year: Economists

| Updated: November 20, 2017 13:55:31

US tax cuts not likely this year: Economists

US Republicans are not expected to push major tax cuts through Congress this year, according to a majority of economists in a Reuters poll.

The optimism about a tax overhaul has helped push the US stock market up for most of this year.

But the skepticism about major tax cuts has been growing over the past two weeks, causing share prices to wobble.

The House of Representatives on Thursday approved a package of tax reductions estimated to raise the federal deficit by nearly $1.5 trillion over a decade.  The Senate will be the focus for debate.

Nearly two-thirds of the more than 60 economists who answered an extra question in the Nov. 13-17 poll, which mostly took place before the tax cuts passed the House, said they were not confident the administration would get the legislation passed this year.

“We feel that if it does pass next year, it is likely to be less ambitious and more focused on temporary cuts than reform,” Ajay Rajadhyaksha, head of macro research at Barclays, wrote in a note.

The effect of tax cuts would probably be muted because of a lack of wage growth and a high level of employment, he added.

In a Reuters poll last month, a strong majority of economists said the US economy did not need a big fiscal stimulus at this late stage of the business cycle.

However, the poll still showed the Fed raising rates by 25 basis points more to 1.25-1.50 percent in December, with two increases next year - less than the three the central bank is projecting.

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