How Trump's Tax Plan Could Boost Restaurant Stocks

It's no secret that President Trump supports businesses. He has preached about keeping jobs in the U.S. and lowering corporate tax.

Specifically, he has said that he is aiming to drop the corporate tax rate from the current 35% rate to 15%-20%.

Last week, Trump reaffirmed this plan.

"We are going to be cutting taxes massively for both the middle class and for companies. We're trying to get it down anywhere from 15% to 20%," said Trump

So how will this impact restaurants?

"Restaurants don't receive any such tax benefits, and since only the biggest chains have significant operations overseas, many end up paying a tax rate of around 40% when state and local taxes are factored in," writes "The Motley Fool."

Chipotle, which has been struggling to bounce back on the stock market, paid $294.3 million to Uncle Sam out of its total income of $769.9 million in 2015. This is a whopping 38.2%. If Trump introduces a new plan where the tax rate is cut by 20%, Chipotle's net income could be 33% higher. That's $150 million a year. 

Panera Bread, Wendy's, Starbucks, McDonald's, Jack in the Box, Domino's Pizza and other major restaurant chains pay similar tax rates. Evidently, the income of these chains would spike too.

Although the industry could get a much needed boost, changing the current tax policy is easier said than done. 

"As most Americans know, little in Washington moves quickly, and tax policy is an especially divisive and complicated issue. Republicans have long been itching for corporate tax reform, claiming that the current rates discourage American investment and are the reason for the many "inversions" in recent years, in which an American company merges with smaller one abroad to move its headquarters abroad and benefit from a lower tax rate,"  writes "The Motley Fool."

Even though Trump's tax plan may work in favor of the restaurant industry, his recent call to impose a 20% import tax on goods from Mexico isn't a good thing for restaurant operators. Half of the fresh produce imports are from Mexico. Read more