Former Honeywell CEO Larry Bossidy warns that failure to cut corporate taxes will eventually hurt the economy and the stock market.
Bossidy explained to CNBC that U.S. corporate taxes need to be reduced to encourage more companies to invest in their businesses.
He cautions that it is a dangerous strategic move to put tax reform in second place on the GOP agenda, behind the effort to repeal and replace Obamacare.
Investors' stock-market bets that President Donald Trump can implement his pro-business agenda are partly behind a rally that has taken stock indexes to record highs.
"It seems to me that capital spending has been relatively weak through the recovery. One of the reasons is because of the noncompetitive U.S. tax rate in corporations," he told CNBC.
"If that were to change, I think it would give an impetus to more capital spending," he said. "If it weren't to happen, I think it's going to hurt the market in general but it's also going to hurt the economy."
"When you look at the tax policies, I'm still enthused about what Trump is trying to do in terms of tax reform and the Affordable Care Act revisions," Bossidy said.
Two controversial proposals on how to pay for reducing corporate tax rates — eliminating the corporate interest deduction and installing a border adjustment tax on imports — could raise a trillion dollars each over 10 years. CNBC explained.
"My guess is at the end of the day there will be a small BAT that will go in. It will go in on a phased basis. They'll be an interest deduction cap because you've got to do something to raise" the money to help pay for the package, Bossidy said.
Meanwhile, Reuters reported that written testimony from former FBI director James Comey did not add major revelations about an investigation into Russian meddling with last year's U.S. presidential election.
Comey, who was fired by Trump last month, wrote that the president asked him to drop an investigation of former national security adviser Michael Flynn.
But the details of Comey's testimony, expected to be delivered Thursday to a Senate Committee, appeared to be priced into the stock market.
Investors were concerned that any additional revelation could dampen already flagging momentum for Trump's agenda of lower taxes and lax regulations.
Bets that Trump can implement his agenda are partly behind a rally that has taken stock indexes to record highs.
"They were hoping that there wasn’t going to be anything in there that was more inflammatory," said Peter Costa, president of trading firm Empire Executions.
"The testimony wasn’t as disastrous as it could have been," he said of the prepared remarks, adding that the market was relieved no damaging details emerged and his testimony "more than likely isn’t going to blow up into some big fiasco, another thing that the president has to deal with."
(Newsmax wires services contributed to this report).
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