The CEOs of big business in the US and Australia have differing opinions on whether company tax cuts will drive increased investment and economic growth.

US CEOs, who could see their company tax rate sliced by 43 per cent from 35 per cent to 20 per cent, are less likely to lift investment than their Australian counterparts, who pine for a 17 per cent cut in the tax rate from 30 per cent to 25 per cent.

In the absence of President Trump, Vice President Mike Pence implored America's top CEOs at The Wall Street Journal's annual CEO Council Meeting to "step up" as corporate citizens. "We need your full and unwavering support if you share our conviction that now is the time for tax reform."

But the CEOs were not totally convinced the "once-in-a-generation opportunity" would boost economic growth, with 50 per cent predicting average GDP growth of 2.5 per cent over the next seven years, short of the administration's forecast 3 per cent, with 25 per cent at 3 per cent and 14 per cent greater than 3 per cent.

Larry Summers, former Treasury secretary and Harvard economist, predicts growth of just 2 per cent, saying there is nothing in the experience of past tax cuts to indicate they lead to higher economic growth.

Stephen Roach, former chairman of Morgan Stanley Asia and senior fellow at Yale University, similarly downplays the impact of cuts to corporate taxes, suggesting they wouldn't stimulate consumer spending "but boost markets above their intrinsic valuations".

He said the Fed should have started lifting rates earlier. "The banks have learned a lot of lessons but I'm not so sure our politicians and central bankers have. This is a tax cut being driven by a powerful need to provide tax cuts to those who don't really need it."

Sobering comments from respected onlookers and that's what makes a market--differing opinions.

While unconfirmed, NBC claimed President Trump and his heirs potentially could save over US$1 billion under the tax proposal. I did mention a few weeks ago Donald Trump is a businessman first and president second.

The Sydney Morning Herald's Peter Hartcher suggests "never has so much been offered to so few" in an investigative piece this week on the tax reform proposal titled, "Tax cuts reveal Trump as a fake". In Trump's own words, "You can never be too greedy".

Massive bets have been placed on the delivery of tax reform. Expectations along with complacency are high. There is little room for disappointment.

Interestingly, when the Nasdaq chalked up its 66th record in 2017 on 16 November, CNN's Fear & Greed Index swung from a Neutral to a Fear reading. Could this be one of the greatest "buy the rumour, sell the fact" moments?

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Peter Warnes is Morningstar's head of equities research. Any Morningstar ratings/recommendations contained in this report are based on the full research report available from Morningstar.

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