Trump's tax overhaul could be credit negative for the US: Moody's

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President Donald Trump speaks to the National Association of Manufactures at the Mandarin Oriental hotel, Friday, Sept. 29, 2017, in Washington. (AP Photo/Evan Vucci)

President Donald Trump and the Republican Party unveiled the framework for their long-awaited tax overhaul last week, and on Monday, Moody’s Investors Service said the plan would likely be a negative credit event for the United States government, though positive for most sectors of the economy.

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Moody’s determination that the tax reform package would be credit negative for the country is predicated on spending and deficit concerns.

“The framework is broadly in line with our assumption that tax cuts would not be offset by equivalent cuts to spending, which would put upward pressure on the federal budget deficit and debt,” the company said, adding that the increase in taxable income from higher economic growth would not be sufficient to cover the costs of tax cuts.

However, some sectors are poised to get a bump from lower rates, Moody’s said, including banks and insurers. Broadening the tax base through deduction eliminations would also be positive for U.S. credit.

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Moody’s did acknowledge that the plan is light on specific details, as it will serve as negotiating framework for lawmakers in Congress.

The White House and Republican leadership have yet to address how they plan to offset the cost of tax cuts, although administration officials have said in the past that the tax cuts would pay for themselves. GOP lawmakers expect tax reform to be completed by the end of the year.

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