President Donald Trump told factory owners and executives on Friday that his proposed tax overhaul will slash rates for businesses and jolt the economy, part of a campaign to bring pressure on Congress to finally deliver him a signature legislative achievement. The plan will provide “the lowest top marginal income tax rate for small and medium-sized businesses in more than 80 years. This huge tax cut will be rocket fuel for our economy,” Trump told the National Association of Manufacturers in Washington. The Trump administration is trying to build momentum for the Republican tax proposal against criticism that it would heap trillions of dollars onto the national debt. The White House and Republican congressional leaders have said little about how they’ll offset large cuts to corporate and personal income tax rates, instead asserting that the overhaul will create an economic surge, boosting job growth in manufacturing and other sectors.
One potential offset — the elimination of a deduction for state and local income taxes — is subject to negotiation, National Economic Council Director Gary Cohn said on Bloomberg Television on Friday. “When we grow American manufacturing, we don’t only grow our jobs and wages, we grow the American spirit,” Trump said. “When we purchase products made in America, fashioned by our fellow citizens, we renew the bonds of national loyalty that link us all together.”
Trump has yet to sign a major piece of legislation, after Congress failed repeatedly this year to pass a repeal of Obamacare, his predecessor’s signature health care law. He and congressional Republicans are counting on a tax overhaul to lift their political fortunes headed into the 2018 midterm elections.
“Already we are seeing the result of an economic policy that puts America first,” Trump said. Unemployment is at a 16-year low, wages are rising and the stock market “is soaring to record levels,” he said. He noted that gross domestic product growth in the second quarter was revised upward to an annualized rate of 3.1 percent. It’s “a number that hasn’t been seen in a very, very long time and a number that’s way ahead of schedule.”
Quarterly growth hit or exceeded three percent eight times under President Barack Obama, most recently in the first quarter of 2015, when GDP grew at an annualized rate of 3.2 percent. Trump touted several provisions in the tax plan that could benefit manufacturers, including a reduction in the corporate rate to 20 percent, a tax break for investment in new equipment and a low, one-time repatriation tax for profits held overseas.
“Our current tax code punishes companies that do business in the United States and encourages them to leave,” he said.
The president also highlighted the tax proposal’s reduced tax rates for pass-through businesses — companies ranging from mom-and-pop grocers to hedge funds whose profits flow as income to their owners, who then pay taxes based on their own individual rates. The plan would cap pass-through rates at 25 percent, lower than the top individual rate. That has raised concerns that wealthy taxpayers would configure their affairs in order to take advantage of the lower pass-through rate.