HOUSE_OVERSIGHT_023083.jpg
1.86 MB
Extraction Summary
1
People
5
Organizations
1
Locations
0
Events
1
Relationships
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Quotes
Document Information
Type:
Financial research report / equity strategy report
File Size:
1.86 MB
Summary
This is page 15 of a Bank of America Merrill Lynch 'Equity Strategy Focus Point' report dated January 29, 2017. It analyzes the financial impact of a proposed Border Adjustment Tax (BAT) and tax rate changes on various industries, utilizing sensitivity tables and bar charts to project Earnings Per Share (EPS) impacts. The text discusses tax reform proposals by Donald Trump and the 'Blueprint plan,' specifically regarding the elimination of tax loopholes and the potential move to a territorial tax system. The document bears a 'HOUSE_OVERSIGHT' bates stamp, indicating it was part of a congressional document production.
People (1)
| Name | Role | Context |
|---|---|---|
| Donald Trump | President (implied) |
Mentioned in the context of tax proposals: 'Both Trump and the Blueprint proposal suggest getting rid of special-inte...
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Organizations (5)
| Name | Type | Context |
|---|---|---|
| Bank of America Merrill Lynch |
Logo in footer and source citations
|
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| BofAML US Equity & Quant Strategy |
Cited as source for data
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| FactSet |
Cited as source for data
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|
| S&P |
Cited as source for data
|
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| House Oversight Committee |
Implied by Bates stamp 'HOUSE_OVERSIGHT_023083'
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Locations (1)
| Location | Context |
|---|---|
|
Mentioned regarding tax systems and corporate tax breaks
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Relationships (1)
Both Trump and the Blueprint proposal suggest getting rid of special-interest deductions...
Key Quotes (3)
"Below we highlight industries which could potentially benefit most / be hurt most by the BAT."Source
HOUSE_OVERSIGHT_023083.jpg
Quote #1
"Both Trump and the Blueprint proposal suggest getting rid of special-interest deductions and credits that distort capital allocation decisions."Source
HOUSE_OVERSIGHT_023083.jpg
Quote #2
"The #1 and #3 “tax breaks” are the deferral of foreign income and certain foreign financial income, but these would become irrelevant if the US moves to a territorial tax system..."Source
HOUSE_OVERSIGHT_023083.jpg
Quote #3
Full Extracted Text
Complete text extracted from the document (2,592 characters)
Table 15: Sensitivity of a company's domestic earnings
Net exports (% of COGS)
Tax rate -100% -50% 0% 50% 100%*
15% -38% -4% 31% 65% 100%
18% -54% -13% 27% 67% 108%
20% -69% -23% 23% 69% 115%
23% -85% -33% 19% 71% 123%
25% -100% -42% 15% 73% 131%
28% -115% -52% 12% 75% 138%
30% -131% -62% 8% 77% 146%
33% -146% -71% 4% 79% 154%
35% -162% -81% 0% 81% 162%
Source: BofAML US Equity & Quant Strategy
*We note that it is unlikely that a company can be a 100% net exporter and have any domestic earnings to begin with.
Note: We assume a company with a 40% gross margin, operating expenses are 20% of sales and an initial tax rate of 35%
Net exports (% of COGS)
Tax rate -100% -50% 0% 50% 100%*
15% -38% -4% 31% 65% 100%
18% -54% -13% 27% 67% 108%
20% -69% -23% 23% 69% 115%
23% -85% -33% 19% 71% 123%
25% -100% -42% 15% 73% 131%
28% -115% -52% 12% 75% 138%
30% -131% -62% 8% 77% 146%
33% -146% -71% 4% 79% 154%
35% -162% -81% 0% 81% 162%
Source: BofAML US Equity & Quant Strategy
*We note that it is unlikely that a company can be a 100% net exporter and have any domestic earnings to begin with.
Note: We assume a company with a 40% gross margin, operating expenses are 20% of sales and an initial tax rate of 35%
Industry screen: Below we highlight industries which could potentially benefit most / be hurt most by the BAT.
Chart 13: Industry EPS impact from border adjustment tax (15% rate)
[Chart Data Labels: Industrial Conglomerates, Life Sciences Tools & Svcs, Chemicals, Household Products, Machinery, Health Care Technology, Electrical Equipment, Media, IT Svcs, Energy Equipment & Svcs, Biotechnology, Semiconductors & Sem Equip, Software, Pharmaceuticals, Trading Cos & Distributors, Health Care Equipment &..., Metals & Mining, Building Products, Electronic Equip Instr &..., Construction Materials, Oil Gas & Consumable Fuels, Communications Equipment, Tech Hardware, Health Care Providers & Svcs, Household Durables, Auto Components, Leisure Products, Specialty Retail, Distributors, Textiles Apparel & Luxury Goods, Internet & Direct Mktg Retail, Automobiles, Multiline Retail, Food & Staples Retailing]
15% tax rate
Source: BofAML US Equity & Quant Strategy, FactSet, S&P
[Chart Data Labels: Industrial Conglomerates, Life Sciences Tools & Svcs, Chemicals, Household Products, Machinery, Health Care Technology, Electrical Equipment, Media, IT Svcs, Energy Equipment & Svcs, Biotechnology, Semiconductors & Sem Equip, Software, Pharmaceuticals, Trading Cos & Distributors, Health Care Equipment &..., Metals & Mining, Building Products, Electronic Equip Instr &..., Construction Materials, Oil Gas & Consumable Fuels, Communications Equipment, Tech Hardware, Health Care Providers & Svcs, Household Durables, Auto Components, Leisure Products, Specialty Retail, Distributors, Textiles Apparel & Luxury Goods, Internet & Direct Mktg Retail, Automobiles, Multiline Retail, Food & Staples Retailing]
15% tax rate
Source: BofAML US Equity & Quant Strategy, FactSet, S&P
Chart 14: Industry EPS impact from border adjustment tax (20% rate)
[Chart Data Labels: Same as Chart 13]
20% tax rate
Source: BofAML US Equity & Quant Strategy, FactSet, S&P
[Chart Data Labels: Same as Chart 13]
20% tax rate
Source: BofAML US Equity & Quant Strategy, FactSet, S&P
Chart 15: Industry EPS impact from border adjustment tax (25% rate)
[Chart Data Labels: Same as Chart 13]
25% tax rate
Source: BofAML US Equity & Quant Strategy, FactSet, S&P
[Chart Data Labels: Same as Chart 13]
25% tax rate
Source: BofAML US Equity & Quant Strategy, FactSet, S&P
Closing loopholes
Both Trump and the Blueprint proposal suggest getting rid of special-interest deductions and credits that distort capital allocation decisions. The table below lists the 25 biggest US corporate tax breaks. The #1 and #3 “tax breaks” are the deferral of foreign income and certain foreign financial income, but these would become irrelevant if the US moves to a territorial tax system, as is being proposed by the Blueprint plan. Exempting corporations from paying US taxes on foreign income would put the US in
Both Trump and the Blueprint proposal suggest getting rid of special-interest deductions and credits that distort capital allocation decisions. The table below lists the 25 biggest US corporate tax breaks. The #1 and #3 “tax breaks” are the deferral of foreign income and certain foreign financial income, but these would become irrelevant if the US moves to a territorial tax system, as is being proposed by the Blueprint plan. Exempting corporations from paying US taxes on foreign income would put the US in
Bank of America Merrill Lynch
Equity Strategy Focus Point | 29 January 2017 15
HOUSE_OVERSIGHT_023083
Equity Strategy Focus Point | 29 January 2017 15
HOUSE_OVERSIGHT_023083
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