President Donald Trump appears to be on an island when it comes to his desire to fulfil one of his biggest campaign promises.
Since 2015, Trump has advocated for the federal corporate tax rate to be slashed from its current rate of 35% to 15%. The president stated in various campaign and post-election speeches that a 15% rate will make the US more competitive globally, produce more jobs, and kick-start economic growth.
“We’re looking at a 15% rate,” Trump said at a meeting on tax reform last Wednesday. “And we want a 15% rate because that would bring us low — not by any means the lowest — but it would bring us to a level where China and other countries are. And we will be able to compete with anybody. Nobody will be able to touch us. So we would like to see 15%.”
While Trump has been insistent on the 15% rate, nearly every other Republican involved in the tax reform effort has admitted that the number is unworkable.
Here’s a quick rundown of what some of the so-called “Big Six” tax writers said on the issue:
- Treasury Secretary Steven Mnuchin: “The president has made it clear since the campaign, ideally he’d like to get it down to 15 per cent. I don’t know if we’ll be able to achieve that given the budget issues, but we’re going to get this down to a very competitive level.”
- National Economic Council Director Gary Cohn: “I would like to get the tax rate as low as possible so that businesses want to create jobs here.”
- House Speaker Paul Ryan: “I think our goal is to be at or below the industrial world average, and that’s 22.5%. So our goal is to get in the mid- to low 20s.”
- Senate Finance Committee Chair Orrin Hatch: “The president would like it at 15%. I don’t think we can go that low. But I think there’s a possibility it can go as low as 20%.”
Even a survey of tax professionals conducted by consulting firm Deloitte’s tax research arm are shows many in the industry are sceptical Trump can meet his target. Just 5.3% of the more than 3,100 people surveyed expect the tax bill to get the corporate rate down to 15%.
The major issue for Republicans in getting the rate that low is the process being used to pass the bill. The GOP plans to use the budget reconciliation process so that the tax package can be passed in the Senate with a simple majority and bypass a filibuster by Democrats.
In order to use that process, the bill can’t add to the deficit after 10 years. This means the lower tax revenue from the corporate rate cut needs to be made up by closing deductions or generating revenue in other ways.
Even if Republicans use “dynamic scoring,” a controversial method that assumes increased growth will make up some of the lost revenue, this means GOP leaders either have to find a massive amount of offsets to make up for the lost revenue and qualify under budget rules or accept that the rate will not get down to 15%.
In a bipartisan tax meeting on Wednesday, Trump suggested that the Republican tax plan may end increasing taxes on the wealthiest Americans.
“I think the wealthy will be pretty much where they are, pretty much where they are,” Trump said. “If they have to go higher, they will go higher.”
If that were to happen, it may allow Republicans to lower the corporate rate further and possibly fulfil the president’s 15% goal. Getting congressional Republicans on board with an increase, however, is highly unlikely.
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