I think GOP will pass a watered down tax reform bill

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Republican leaders will pass a tax bill, but it’ll be a “watered down” version from what was originally envisioned, closely followed strategist Jim Paulsen told CNBC on Wednesday.

The full Senate could vote on a tax reform bill as early as Thursday, but some lawmakers and conservative groups remain in disagreement about certain parts of the bill.

The House has already approved its version of the plan, which would cut taxes for businesses and individuals.

“I think something will get passed on the tax bill, but it will be pretty watered down as far as a stimulative force,” said Paulsen, chief investment strategist at The Leuthold Group. “I also think expectations have been pushed up a fair amount.”

U.S. stocks were mixed Wednesday as Republicans move closer to a Senate tax vote. Some on Wall Street are particularly focused on the corporate tax rate, which in the bill would be slashed to 20 percent from 35 percent after a one-year delay.

Some have contended that the plan benefits corporations at the expense of small businesses.

When asked whether the GOP will stick with the plan to cut the corporate rate to 20 percent, Paulsen told “Squawk Box,” “No, I don’t think so. I think it might end up negotiating that a little higher to get this done.”

“They need a victory more than anything now,” he added. “And I think they’ll get something passed but it might not be that significant.”

Regarding the market, Paulsen sees 2018 being a bit challenging for stocks. “We certainly could get a correction,” he said. “If we do, at this point, I think it’ll be a whale of a buying opportunity.”

— CNBC’s Jacob Pramuk and Reuters contributed to this report.



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