Corporate tax reform is fairly well baked into stock prices at the moment, which are trading in expectation of around 11%-12% year-over-year earnings growth over the next five years. Tax breaks of some form are likely a requirement in order to make this happen.Tax reform is more or less split across party lines. Democrats, as the “big government” party, prefer higher taxes in order to fund various programs, while “small government” Republicans prefer to cut taxes and leave more economic activity in the hands of the private sector.Tax reform may seem more straightforward than healthcare reform. The latter is often taken as a “life or death” matter while tax reform – though still an emotional thing given it fundamentally involves money – is more cut-and-dried as a matter of running calculations.So even while Republicans are unified on the “lower taxes” ideology, there are still many things to iron out and several potential stumbling blocks.Among the most notable:1. The national debt is already the highest it’s ever been as a percentage of GDP at 105%. Tax cuts may stimulate growth to an extent, but without cuts in other parts of the budget, national debt will continue to expand as a percentage of GDP. Eliminating certain interest deductions and other secondary/tertiary deductions can help bridge the gap, but doing so will come with resistance from lobbyists and special interest groups who wish to uphold these deductions for their constituents.2. Border adjustment is one way for the GOP to balance any funding shortfalls, by subsidizing exports and taxing imports. This falls into the Trump administration’s “America first” credo and represents one way to balance existing US trade deficits. However, Trump himself has expressed distaste for the concept, saying it adds layers of complexity. The thinking is that the more bloated and complex the tax code gets, the less efficient it works, with loopholes and higher amounts of uncollected taxes.There is also much concern over how border adjustment would affect the retail sector given their large import needs. The industry is already reeling from more sales moving online (i.e., Amazon effect) and news of solvency issues among some of the nation's longest-running chains, such as Sears and Kmart. Walmart, once the pinnacle of American retail, is also slowly adapting to the shift and snapping up niche retailers to both broaden and deepen its appeal.3. Even with ideological unity for lower taxes, deciding who will represent the main beneficiaries of these breaks remains in question. Some Republicans are okay with breaks at the top of the income bracket if it best promotes economic growth. Others are set on seeing breaks predominantly for the middle class and trying to avoid the political backlash associated with cutting taxes for the “the 1%.” How the tax brackets are organized by income levels and what the nominal rates will come to will be subject to debate.ConclusionEither way, something will need to get done on tax reform, as the stock market largely has this priced in. Failure on the behalf of Republicans to drive nominal corporate rates down to 20% at the very least is likely to be met with a dip in the US equities markets.-Other:Fun tool that can be used to play around with the US budget: Stabilize the Budget: Committee For a Responsible Federal Budget