On Sep 6, Chairperson of House Ways and Means Committee, Kevin Brady said the Tax Cuts 2.0 reform will be aimed at making individual tax cuts permanent even after 2025. The three key bills in focus of the Tax Cuts 2.0 legislation are the Protecting Family and Small Business Tax Cuts Act, the Family Savings Act and the American Innovation Act.
Although doubts remained over the passage of the second round of tax cuts before November's midterm elections, expectations are high over the eventual passage of the three-pronged reform package. Permanent individual tax cuts and easing rules over retirement savings are likely to benefit consumer discretionary stocks and is hence a strong investment.
Individual Tax Cuts A Reality After 2025?
Per the Tax Cuts and Jobs Act 2017, corporate tax was reduced from 35% to 21%. In the celebrated tax cut bill, individuals were subjected to tax provisions, which were set to expire after 2025. However, on Sep 10, Chair Kevin Brady released the Protecting Family and Small Business Tax Cuts Act of 2018.
Per the act, individual income and estate tax provisions present in the 2017 Tax Cut Act will be made permanent. In this bill, the government would have to spend around $631 billion in the coming 10 years, from fiscal 2019 to 2028, and about $3.2 trillion in the following decade from fiscal 2029 to 2038. Brady supported this bill and said that tax cuts for small businesses and families are "important for growth and certainty."
Tax Cuts 2.0 Facilitate Easier Retirement Savings
In the second bill of the Tax Cuts 2.0 Act, the Family Savings Act, the contribution age limit of 70.5 will be eliminated. Additionally, withdrawals free from penalty for specific child-care associated expenses will be allowed. While talking about this bill, Brady said that the focus is on "looking at ways where it's easier for families to save earlier in life and more over time," for long-term goals like retirement and healthcare.
Usage of Universal Savings Accounts is also encouraged in this bill. Although contributions to the Universal Savings Account are subjected to tax, earnings will be tax exempted. It will be easier to take out money from the Universal Savings Accounts than any other retirement accounts, the 401(k) retirement savings account.
In the third and last point of the three-pronged reform package, the American Innovation Act, startup companies will be subjected to tax breaks. Brady said that in the bill, entrepreneurs will be helped to expand their businesses. Brady added that this bill will lead to further innovation "by helping new entrepreneurs move from the kitchen table to Main Street and beyond."
5 Stocks to Buy Now
Republicans are emphasizing making the individual tax cuts permanent in the Tax Cuts 2.0. Additionally, rules for savings will also be eased to aid growth. In this context, investing in consumer discretionary stocks looks prudent now. However, picking winning stocks may be difficult.
This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.
In this context, we have narrowed down our search to the following stocks based on a good VGM Score and Zacks Rank. You can see the complete list of today's Zacks #1 Rank stocks here .
Guess', Inc. GES is a designer of lifestyle collections of apparel and accessories for men, women and children.
The company is based in Los Angeles, CA and carries a Zacks Rank #2. The company has a VGM Score of A. The expected earnings growth rate for the current year is 48.10%. The Zacks Consensus Estimate for the current year has improved 3% over the past 60 days.
Caleres, Inc. CAL is a retailer and wholesaler of footwear in the United States, Canada, Guam and Italy.
The company is based in St. Louis, MO and carries a Zacks Rank #2. The company has a VGM Score of A. The expected earnings growth rate for the current year is 15.74%. The Zacks Consensus Estimate for the current year has improved 1.2% over the past 60 days.
Malibu Boats, Inc. MBUU is a manufacturer, designer, distributor, marketer and seller of recreational powerboats.
The company is based in Loudon, TN and carries a Zacks Rank #1. It has a VGM Score of B. The expected earnings growth rate for the current year is 24.31%. The Zacks Consensus Estimate for the current year has improved 12.9% over the past 60 days.
Weight Watchers International, Inc. WTW is a provider of weight management services all over the world.
The company, based in New York, sports a Zacks Rank #1 and has a VGM Score of B. The expected earnings growth rate for the current year is 80.45%. The Zacks Consensus Estimate for the current year has improved 2.4% over the past 60 days.
Tailored Brands, Inc. TLRD is a specialty apparel retailer the United States, Puerto Rico, and Canada.
The company is based in Houston, TX and carries a Zacks Rank #2. It has a VGM Score of A. The expected earnings growth rate for the current year is 13.64%. The Zacks Consensus Estimate for the current year has improved 0.4% over the past 60 days.
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