At first glance, President Trump’s tax-cut plan has merit. It proposes lowering corporate and individual tax rates to stimulate economic growth. The plan calls for repatriating income held overseas by U.S. corporations, which will bring an influx of trillions of dollars of new capital into the country. In addition, the plan may allow businesses to write-off capital investment as expenses, encouraging even more capital expenditures — which, in turn, will help create jobs, spur infrastructure investment, and revive U.S. manufacturing.
However, such massive investment also needs protection from natural disasters, such as hurricanes, earthquakes, and fires. Tax reform, if not carefully thought out, could contain pitfalls that will ultimately raise the cost of capital expenditures by making insurance on that investment so much more expensive. The result would be to undo some of the intended benefits of tax reform.
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