President Donald Trump told White House staff members that he wants to deliver a 15% corporate tax rate, a major cut from the current 35% statutory rate, regardless of whether the plan will add to the deficit, The Wall Street Journal reported Monday.
That may be easier said than done. Trump will face strong opposition from not only Democrats, but also from members of his own party.
Many Republican lawmakers have long held that any tax cut plan should be deficit-neutral, and analysts say Trump’s plan could cause the federal deficit to balloon.
The left-leaning Tax Policy Center estimated that Trump’s plan for a 15% corporate tax rate would decrease federal revenues by $US2.3 trillion between 2016 and 2026. Trump’s campaign tax plan for corporations and individuals would cause revenue to drop by roughly $US6 trillion between 2016 and 2026, according to the projections.
Even when using dynamic scoring, a method that assumes that tax cuts will increase economic growth to help offset the declining revenue, the plan would likely add to the deficit unless economic growth nearly doubles, the conservative-leaning Tax Foundation told Vox.
House Speaker Paul Ryan has long advocated for a deficit-neutral tax plan in his Better Way platform, which could make the tax deal unpalatable to the House GOP leader.
Sen. Orrin Hatch, head of the Senate Finance Committee, also talked down the possibility of a 15% corporate rate to reporters.
“I’d love to do that,” Hatch said. “I’m not sure we can get them down that low.”
Politico also reported that many of the key aspects various Republicans favoured, including such provisions as a border-adjustment tax, are not expected to be included in the plan, giving deficit-sceptical Republicans fewer reasons to support it.
Given the potential thorniness within Trump’s own party, many experts believe the eventual tax plan that makes its way to Congress will look very different.
“We share Chair Hatch’s scepticism as we see neither the political will nor the procedural path to securing a 15% corporate rate. Instead, we maintain our view that a top corporate rate of 25-28% is the likeliest outcome at this point,” Issac Boltansky of the political research firm Compass Point wrote in a note to clients on Tuesday.
Greg Valliere, the chief global strategist and longtime political analyst at Horizon Investments, echoed similar sentiments in a letter to clients.
“As we wrote yesterday, Trump’s legacy will hinge on whether he can win Republican support,” Valliere wrote. “We still think he can get a tax bill by winter, with an effective date no sooner than Jan. 1, 2018, but the tax cuts won’t be as profound as Trump wants.”
Trump administration officials, including Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn, are expected to meet with congressional leaders, including Ryan and Hatch, at the White House later Tuesday.
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