WASHINGTON (Sputnik) — The tax changes proposed by the administration on April 26 were light on details, Moody’s said, but raise the possibility of higher debt and an increased federal deficit.
"While the proposed tax cuts might boost economic growth in the short term, the effect would be unlikely to last long and wouldn't be sufficient to offset the reduction in government revenue," the release stated.
Trump’s plan would cut corporate taxes to 15 percent from 35 percent, which would benefit investment-grade companies and banks. Moody’s warned that bank profits would not mean higher capital levels if they do not distribute the profits to shareholders.
Lower corporate tax rates would also be negative for utilities and their holding companies, which already pay less in taxes than the amount they charge to customers.
Moody’s raised its forecast for US fiscal debt and deficits on the assumption some parts of the Trump tax plan will be implemented, and tax cuts will not be fully funded.