Mnuchin Corporate tax cut proposal and Fannie Mae reform

Treasury Secretary Steven Mnuchin announced a proposal from the Trump administration that would cut the headline corporate tax rate to 15%.  This would be the largest cut to the headline rate ever however the average corporate tax rate, after deductions, is current effective rate is less than 13.00% (per the General Accounting Office or GAO).  Mnuchin’s announcement of the corporate tax cut proposal (and he mentioned Fannie Mae reform which we’ll discuss later in the article) was not a surprise as Trump floated a 15% corporate tax rate during the campaign.  The details of how the plan will work, and if it will bring the effective rate below 13% as it currently is, are unclear because no details have been released.  The details of the plan are supposed to be released later today.  Mnuchin corporate tax

It will be important to see what role “TrumpCare 2.0” plays in this because many economist have said that the administration needs a new health care plan in place prior to a new corporate tax plan to avoid blowing out the annual budget.  Many fear the corporate tax cut will add hundreds of billions to the deficit each year (some have estimated it could be as high as a trillion per year).  Right now the United States has more debt than ever before so the tolerance to massively increase that, on top of the increases that happen each year, is very little.

Treasury Secretary also brought up Fannie Mae reform as well.  When the government took over the mortgage giant in 2008; the government was losing billions of dollars.  Since then the loses have been recovered and the mortgage giant supplies a steady stream of profit.  Fannie Mae has provided low California mortgage rates for years now and any reform of the mortgage giant will be looked at closely.  

30 year fixed rate mortgages, 20 year fixed rate mortgages and 15 year fixed rate mortgages generally have been the preferred mortgage programs obtained by home buyers or those refinancing a current mortgage.  Reforming Fannie Mae will be extremely difficult because the mortgage giant is a huge part of the mortgage industry; in fact it’s the biggest and most important piece.  Californians, like many Americans, have relied on the mortgage giant for their home mortgage needs.  Fannie Mae has recently announced reforms to how the calculate student loan debt, a Day 1 Certainty program that reduces the amount of documentation for some borrower’s and various regulations to try and spur the home mortgage market.