In brief, the tax reform was largely in line with what was leaked and what was expected. Small surprises: the tax bracket for high income earners was 2% more (at 35%) than what Trump campaigned on, and the standard deduction has been doubled so that no married couple pays tax on their first 24k earned, Citi notes.

As expected, no mention of border adjustment taxes. The plan also looks to repeal real estate taxes, alternative minimum tax and the death tax. Territorial taxes are also included. As we type, Mnuchin and Cohn are answering their last question.

Below is the actual tax from the White House:

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual And Business Tax Cut in American History

Goals For Tax Reform

• Grow the economy and create millions of jobs
• Simplify our burdensome tax code
• Provide tax relief to American families—especially middle-income families
• Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

• Tax relief for American families, especially middle-income families:
  • Reducing the 7 tax brackets to 3 tax brackets of to%, 25% and 35%
  • Doubling the standard deduction
  • Providing tax relief for families with child and dependent care expenses
• Simplification:
  • Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
  • Protect the home ownership and charitable gift tax deductions
  • Repeal the Alternative Minimum Tax
  • Repeal the death tax
• Repeal the 3.8% Obamacare tax that hits small businesses and investment income

Business Reform

• 15% business tax rate
• Territorial tax system to level the playing field for American companies
• One-time tax on trillions of dollars held overseas
• Eliminate tax breaks for special interests

Process

Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that provides massive tax relief, creates jobs, and makes America more competitive—and can pass both chambers.

A few additional observations from Citi:

What didn’t Mnuchin or Cohn tell us, in addition to the details noted above:

• Did not specify if the plan would be “revenue neutral,” which is needed to get permanent policy.
• Mnuchin didn’t talk about how dynamic scoring could play a hand in implementation during the official press conference but he did touch on this in an earlier appearance for The Hill. Dynamic analysis accounts for the macroeconomic impacts of tax, spending, and regulatory policy, while dynamic scoring uses dynamic analysis in estimating the budgetary impact of proposed policy changes. Ultimately, the Trump Administration believes policies will generate growth above 3.0%YoY, which can pay for the plan. The challenge is that it has to sell this view to Congress.
• Did not discuss border adjustment taxes (BAT) during the official conference but did brush on this during his appearance on The Hill.Mnuchin said "we don't think it works in its current form" but there will be ongoing discussions on this. Ryan also acknowledged the BAT needed work.

When asked by The Hill editor-in-chief as to whether or not he's reached out to any centrist Democrats for input on the plan, Mnuchin declined to comment on the "specifics." He "hopes Democrats won't get in way."

Ryan said several times Wednesday that Republicans plan to use reconciliation as a vehicle for tax reform. This point is very important but to illustrate this, one has to understand the reconciliation process.

The Center on Budget and Policy Priorities helps define it. Created by the Congressional Budget Act of 1974, reconciliation allows for expedited consideration of certain tax, spending, and debt limit legislation. In the Senate, reconciliation bills are approved with a simple majority of 51. To start the reconciliation process, the House and Senate must agree on a budget resolution that includes “reconciliation directives” for specified committees in the House and Senate. Those committees must report legislation by a certain date that does one or more of the following:

• Increases or decreases spending (outlays) by specified amounts over a specified time;
• Increases or decreases revenues by specified amounts over a specified time
• Raises or lowers the public debt limit by a specified amount.

Republicans could pursue tax reform under the budget reconciliation process, meaning the Senate could pass bills related to the budget – but reconciliation requires the long-term savings. Post 10y, scoring has to indicate that the bill will be revenue neutral or revenue positive or it doesn’t work.  

That looks to be exactly why Republicans wanted to prioritize healthcare reform: the Congressional Budget Office estimated the American Health Care Act would reduce federal deficits by USD337 billion over the next 10y. Given that tax reform estimates signal a revenue burden, various political analysts posit that Republicans have been looking to repeal Obamacare to pay for some parts of tax reform.

Without healthcare reform, Republicans could face challenges getting a revenue neutral, long-term tax reform.

• The Tax Policy Center estimates Trump's plan for a 15% corporate tax rate would decrease federal revenues by USD2.3tn between 2016 and 2026. Trump's campaign tax plan for corporations and individuals could cause revenue to drop by roughly USD6tn between 2016 and 2026, according to the projections.
• The Tax Policy Center is left-leaning but is being heard out. Even Senate Finance Chairman Orrin Hatch has said a 15% corporate tax would increase the deficit and if the overall plan doesn’t include border adjustment tax – or borrow funds via healthcare reform – Republicans will have to find revenue streams.

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Some parting thoughts:: as Time's Zeke Miller notes this Trump tax plan is the same as the one released last fall. "If his team has been working on it for the last 6mos, we didn't see it 2day."

Additionally, while the proposed tax plan does not raise taxes on hedge fund managers, as Trump vowed during his campaign, courtesy of the cut in LLC tax rates, it will likely lower the taxes many if not all HF managers pay.

And, of course, with the state deduction gone, it means that for many Americans the net effect will be to raise, not lower the amount of tax owed.

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Of course the crucial question is - with The White House targeting deductions to help pay for tax plan (but mortgage/charitable are protected), how does this not blow up deficit?

Perhaps the most concerning aspect is the apparent expectations management that is being undertaken this morning:

The White House's presentation will be "pretty broad in the principles," said Marc Short, Trump's director of legislative affairs.

In the coming weeks, Trump will solicit more ideas on how to improve it, Short said. The specifics should start to come this summer.

Short said the administration did not want to set a firm timeline, after demanding a quick House vote on a health care bill and watching it fail.

But, Short added, "I don't see this sliding into 2018."

The biggest question is - will this be enough to satisfy the market? For now the answer is no, because as Citi adds the market isn't jumping around on this but there is a bid in US fixed income, taking USDJPY down towards 111.25. All in all, a classic buy the rumor, sell the news on an underdelivered (but fairly presented as such) "big announcement" from the Trump Administration.