Irshad Salim, BE2C2 Report — President Donald Trump has instructed his advisers to make cutting the corporate tax rate to 15 percent a centerpiece of his tax-cut blueprint to be unveiled this week.
Cutting the corporate tax rate to 15 percent from its current 35 percent level was one of Mr. Trump’s marquee campaign promises.
The White House is said to be planning to formally roll out the tax plan on Wednesday, first reported by The Wall Street Journal on Monday.
If successful, “It will be bigger, I believe, than any tax cut ever. Maybe the biggest tax cut we’ve ever had,” Trump told the Associated Press on Friday.
The overall tax plan Trump put forward as a candidate would reduce revenues by 2.6 percent of GDP. He has said he will give more information about his plans on Wednesday, although he seems to be maintaining at least one important feature of the earlier proposal: the Corporate tax cut.
Critics, including many conservative economists, warn that an aggressive reduction in taxes could force the federal government to borrow more to make up for the foregone money. The result would be more national debt and steeper interest rates, as the government competes with ordinary businesses and households for loans.
Democrats have made clear that they would be unlikely to support a substantial rate cut without anything sizable in return, reported CNN. That leaves reconciliation as the only pathway, according to several media outlets.
The 15 percent rate is lower than what House Republicans proposed in the tax cut blueprint being pitched by Speaker Paul D. Ryan, and it could be difficult to move through Congress, reported The New York Times.
Senator Orrin G. Hatch of Utah, the Republican chairman of the Senate Finance Committee, said on Monday that such a deep cut might not be well received by Mr. Trump’s party because of its potential to increase the deficit.
The nonpartisan Tax Policy Center estimated last year that the corporate tax cut plan Mr. Trump had proposed, would cost $2.4 trillion over a decade. Still, Steven Mnuchin, the secretary of the Treasury, said on Monday that he was confident the administration’s tax proposal would “pay for itself” through economic growth. He said a growth rate of 3 percent was achievable.
Mr. Mnuchin also said the Trump administration would lay out plans to cut middle income tax rates, simplify the tax code and make American companies more competitive with foreign ones.
White House officials declined to comment on the 15 percent target. They warned that the details were sketchy at best, and others who have discussed the tax overhaul plan with administration officials in recent days said there was still indecision at the highest levels about what elements to include and in what form.
The Wednesday deadline, set hastily by Mr. Trump last week in a comment that appeared to catch some of his closest advisers off guard, was an effort to showcase an ambitious plan for economic growth during his first 100 days in office. During the campaign, he promised to introduce a tax cut proposal to Congress in the first 100 days.
The 15 percent cut represents a return for Mr. Trump to the economic vision that animated his campaign, and a victory of sorts for Mr. Mnuchin, who has been a supporter of the plan.
“Our analysis has always shown that of all the economic bang for the buck from all of the changes that were in the original Trump plan, you get the most economic juice from cutting the corporate rate,” said Stephen Moore, an economist at the Heritage Foundation who advised Mr. Trump’s presidential campaign.
One question that Mr. Trump will have to answer, Mr. Moore said, is whether the 15 percent rate would apply only to corporations or to small businesses, as well. But there are plenty of other unknowns, he added.
Members of Mr. Trump’s team of economic advisers are set to meet with Republican leaders in Congress on Tuesday to discuss the plan.
Roberton Williams, a fellow at the Tax Policy Center who analyzed Mr. Trump’s campaign tax plan, said its high cost would make it more difficult to push through Congress.
“It’s very expensive, and that’s a problem,” Mr. Williams said. “It’s a real heavy lift to get the revenue necessary to pay for these things.”
Mr. Williams said the president’s recent emphasis on tax “cuts” suggested that he was prepared to lose revenue and hope that economic growth will make up the difference. However, Mr. Williams said, such a plan could be difficult for fiscal conservatives to swallow.
“That makes it a lot harder with the budget hawks in Congress,” he said.
Republicans are expecting to pass tax legislation without the support of any Democrats using the Senate’s budget reconciliation procedure. That requires only 51 votes for passage (Republicans control 52 seats in the chamber). But if changes to the tax code add to the deficit, they would expire after 10 years, adding uncertainty for businesses and possibly hurting economic growth.
Economic advisers from Mr. Trump’s campaign had been unhappy that he seemed to be drifting away from the tax principles that helped get him elected. But on Monday, Lawrence A. Kudlow, one of the economists who helped craft Mr. Trump’s plan, said he was pleased that Mr. Trump appeared to be returning to those roots.
“We were at 15 percent from Day 1,” Mr. Kudlow said, lamenting that Mr. Trump’s new economic advisers had discussed scrapping the campaign tax plan. “All the noise in the last week or 10 days sounds like they haven’t junked the plan.”