Republican tax negotiators are targeting a corporate tax rate of 20 percent, according to two people familiar with the matter. That would be higher than President Donald Trump wants — setting up a key decision for the president on a top legislative priority.
Trump has called for cutting the corporate rate to 15 percent, down from the current 35 percent. The plan he’ll see this week is also expected to recommend cutting the top individual tax rate to 35 percent, down from 39.6 percent, two people familiar with the matter said.
Trump and Treasury Secretary Steven Mnuchin have said previously that they didn’t want the tax plan to offer any tax cut to the highest earners — and that they’d balance a rate cut by eliminating deductions that the wealthy use to reduce their tax bills. Mnuchin said in November, weeks after Trump’s election, that “there will be no absolute tax cut for the upper class.”
Reminded of that on Sunday, Mnuchin said: “It was never a promise and it was never a pledge.” But he said again during an appearance on CNN’s “State of the Union” that the tax plan that’s coming this week will be “getting rid of lots of deductions.”
“The current plan — for many, many people, it will not reduce taxes on the high end,” Mnuchin said. He also said the plan will provide a middle-income tax cut and said it will create jobs.
Mnuchin didn’t mention specific tax rates. Nor did Marc Short, the White House legislative affairs director, during an appearance on “Fox News Sunday.” “The president will have to sign off on that and he’ll make his announcement on Wednesday,” Short said.
Trump plans a trip to Indiana on Wednesday for a speech on tax issues, a person familiar with the planning said. The White House and congressional Republican leaders are preparing for a push in the next few months to pass tax legislation. The drive follows a series of defeats since Trump’s inauguration, including their failure so far to repeal Obamacare. Cutting the corporate tax rate is one of Trump’s core principles for an overhaul.
While members of Trump’s own administration have suggested that Trump’s position on the corporate rate might be subject to compromise, the president may yet resist a plan with a rate higher than 15 percent, one person familiar with the matter said.
The people asked not to be identified because details of the tax plan and Trump’s schedule have not been publicly announced. Trump said Friday night during a campaign rally in Huntsville, Alabama, that a tax plan would be released this week, and described it as “massive tax cuts.”
The effect of such cuts on the $20 trillion federal debt remain to be seen. Last week, a pair of key Republican senators reached an agreement on the framework for a 2018 budget resolution that’s expected to allow for a tax cut of $1.5 trillion over 10 years that would add to the deficit — before accounting for any growth or other economic effects of the cuts. Though proponents say tax cuts would stimulate growth to make up for the shortfall, a budget that allows for deficit-increasing tax cuts would depart from years of GOP support for balanced budgets.
Short said Sunday that Trump’s administration “continues to be committed to making sure we’re being fiscally responsible.” While there may be a short-term decrease in revenue, he said, tax cuts would “provide growth that we think will bring in more revenue in the long term.”
House Speaker Paul Ryan and other congressional leaders have discussed a corporate tax rate in the low to mid-20s. Based on recent discussions, the GOP will probably aim for a rate in the range of 20 to 24 percent, said Ryan Ellis, a Republican tax lobbyist who previously worked as chief tax policy director for Grover Norquist’s Americans for Tax Reform.
Ellis said he also expects the so-called “Big Six” negotiators to seek a top individual rate of 35 percent. The Big Six are Mnuchin, National Economic Council Director Gary Cohn, Ryan, Senate Majority Leader Mitch McConnell, R-Ky., and the chairmen of the congressional tax-writing committees.
Ellis also said he expects the framework will call for doubling the standard deduction claimed by many middle-class tax filers, and for repealing the estate tax, which applies only to estates worth more than $5.49 million.
It’s unclear how detailed the framework will be — or whether it will represent the unified approach that the president and GOP leaders have sought.
Senate Finance Chairman Orrin Hatch, R-Utah, a member of the Big Six, has said that he’ll regard the document as a guide, but his panel won’t be bound by it. Nor will his panel be a “rubber stamp” for any particular plan, Hatch said.
The Washington Post reported that Republicans were “targeting” a corporate rate of 20 percent, citing three unnamed people. But the plan remains fluid, those people told the paper. The news website Axios reported on Saturday that the Big Six had already agreed to a 20 percent rate.
House Republicans plan to hold a conference meeting Wednesday, and public information about the plan is expected shortly afterward.
Spokeswomen for Ryan and for House Ways and Means Committee chairman Kevin Brady declined to comment Saturday when asked about the reported details of the emerging plan.
(c) 2017, Bloomberg · Jennifer Jacobs, Sahil Kapur