U.S. President Donald Trump is proposing to slash the corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought into the United States, officials said late on Tuesday. With financial markets eagerly anticipating a White House tax plan, Trump will also call for a sharp cut in the top rate on pass-through businesses, including many small business partnerships and sole proprietorships, to 15 percent from 39.6 percent, an administration official said.
He will propose cutting the income tax rate paid by public corporations to 15 percent from 35 percent, and allowing multinationals to bring in overseas profits at a tax rate of 10 percent versus 35 percent now, the official said. Trump’s proposal will not include a controversial “border-adjustment” tax on imports that was in earlier proposals floated by Republicans in the U.S. House of Representatives as a way to offset revenue losses resulting from tax cuts.
Trump’s tax blueprint will fall short of the kind of comprehensive tax reform that Republicans have long discussed, and serve chiefly as a guidepost for lawmakers in the House and Senate. “We’re driving this a little bit more,” a senior White House official told a group of reporters late on Tuesday.
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The plan is not expected by analysts to include any proposals for raising new revenue to offset that lost by the tax cuts, and so, if enacted, it would potentially add billions of dollars to the federal deficit. Trump sent Treasury Secretary Steve Mnuchin and National Economic Council Director Gary Cohn to Capitol Hill on Tuesday to brief lawmakers on the plan to be unveiled on Wednesday afternoon, likely by Mnuchin.
Mnuchin has been leading the administration’s effort to craft a tax package that can win support in Congress, although the proposals would have a long way to go before becoming law, even with Republicans in control of both the House and Senate. Mnuchin has said the cuts will pay for themselves by generating more economic growth but fiscal hawks, potentially some in Trump’s own Republican Party, along with Democrats, are certain to question these claims.
Trump also may cap the individual top tax rate at 33 percent, repeal the estate and alternative minimum taxes and cut taxes for the middle class, analysts said. Whether Trump will include provisions that could attract Democratic votes, such as a proposal to fund infrastructure spending or a child-care tax credit as proposed by his daughter Ivanka, is still the subject of speculation.
CAPITOL HILL MEETING
Mnuchin and Cohn, both veterans of investment bank Goldman Sachs, went to Senate Republican Leader Mitch McConnell’s office on Tuesday evening, where they all met with House Speaker Paul Ryan, and the chairmen of the House and Senate tax committees, Orrin Hatch and Kevin Brady, respectively. Hatch called it a “preliminary” 30-minute meeting and participants described it as positive and productive.
As Mnuchin left the Capitol he told reporters there is “no question” the Trump administration and Republicans in the Senate and House agree on the “fundamental principles of tax reform.” The senior White House official said Trump would like to see Congress pass tax reform by the middle of autumn.
Trump has struggled to advance his domestic agenda, including taxes. With his 100th day as president approaching on Saturday, he has yet to offer formal legislation to Congress or win passage of a major bill he favors. Some Washington policy analysts said the White House plan could clash in some ways with a broader tax plan shaped months ago by House Republicans, and complicate the consensus-building needed for full tax reform, a political feat not accomplished since 1986 when President Ronald Reagan pulled it off.
The House Republican plan, championed by Ryan and Brady, proposed a 20 percent corporate tax rate. Many U.S. corporations, especially large multinationals, already pay well below the statutory 35 percent tax rate but have been campaigning for a formal rate cut for many years. The Ryan-Brady plan did include “pay-fors,” including a proposed “border adjustment” tax that would favor exports and discourage imports.
When asked after Tuesday’s briefing if Republicans had ruled out including a border adjustment tax in a tax overhaul, Hatch said: “I wouldn’t say that. The House hasn’t given up on that but they’ve acknowledged it needs some work.” Separately cutting the top tax rate for pass-through businesses, which account for most U.S. companies, could benefit Trump himself, said Frank Clemente, executive director of Americans for Tax Fairness, a Democratic activist group.
“In trying to slash taxes for pass-through business entities, Trump is seeking to dramatically reduce his own tax bill,” he said in a statement.