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Mnuchin Talks Tax Reform at Milken Institute Global Conference

Secretary of the Treasury Steve Mnuchin headlined the Milken Institute Global Conference yesterday, trumpeting the administration's tax reform proposals.

Michael Milken’s 20th annual gathering of the best and brightest got underway this week in Beverly Hills. This year’s theme is Building Meaningful Lives, with Mr. Milken himself scheduled to address the crowd at lunch today.

Treasury Secretary Mnuchin was in the spotlight yesterday, with the perhaps unenviable assignment of trying to sell the high level points of the administration’s tax reform proposal. We think the President may be overreaching with his corporate tax rate target, and it’s not immediately clear – and Secretary Mnuchin didn’t provide any measurable clarity on this yesterday – how we as a nation will pay for this.

He reiterated assurances that he’s made previously, that the tax plan would pay for itself by spurring economic growth. Varying estimates place the cost of this proposal anywhere from at least $6 trillion to $7 trillion, and in his comments yesterday, Secretary Mnuchin said that he thinks that we’ll see GDP growth of 3% in the next two years – which would be dramatically higher than the 0.7% annual growth in the first quarter that the Commerce Department announced last Friday.

Secretary Mnuchin said that “two to three percent extra growth can be $3 trillion in revenue” without providing any granularity on the details of the tax proposal. We’re neither economists nor mathematicians, but we’re left to wonder how the remainder of that chasm to $7 trillion will be crossed.

We suspect it will be a drawn out battle in Congress, and we’re looking for the final resolution to be something much more modest than the 15% tax rate that has proposed. As we’ve said before in this space, we think that any protracted uncertainty in tax reform and the President’s other ambitious though poorly defined proposals will be reflected in the most visible megacap names in the stock market. We continue to focus on companies driving the innovation economy from the microcap end of the spectrum that may additionally benefit from rotation out of the S&P 500.

You can watch Secretary Mnuchin’s conversation with Maria Bartiromo in full here and a live stream of ongoing events here.

The conference runs through this Thursday, May 3rd, and is expected to attract 3,500 attendees from 50 countries.

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