What Happened to Trump's 15% Corporate Tax Rate?

President Donald Trump presented his tax plan to Congress, but there was one notable omission: 15 percent. That’s the corporate rate that investors have started pricing into equity markets, and it’s the number that Trump has repeatedly stated as his goal. But with almost $20 trillion in U.S. national debt, and $200 trillion in unfunded entitlement obligations, it may too tough to cut taxes that significantly.

Equity markets have risen since the election as reduced corporate rates present fundamental upside risks to business valuations. One way to value companies is to look at the market capitalization. With public companies, you take the number of shares outstanding and multiply it by the price of those shares. There are other ways to value companies, too. The Discounted Cash Flow method, which is common for private company valuations, is directly influenced by corporate tax rates. And lower corporate tax rates would juice DCF valuations -- effectively making every U.S. company more valuable. Public companies, valued by market cap, are therefore subject to an upside valuation arbitrage if corporate tax cuts are implemented.