Trump’s 15% Corporate Rate Debated During Tax Meetings: Official

  • Disagreement centers on whether legislation can add to deficit
  • Account offers glimpse into closed-door tax-policy sessions

Paul Ryan's Tax-Overhaul Pep Talk

President Donald Trump’s call to slash the corporate income tax rate to 15 percent has faced resistance during private tax meetings, according to a senior White House official.

While Trump has been clear that he thinks cutting the rate, which is currently 35 percent, is essential for job creation, others have said that it’s impossible to cut it as much as he wants without adding to the federal deficit, said the official, who asked not to be named because the discussions are private. The official didn’t specify who had raised the objections, but said administration officials have met with over 200 members of Congress as part of the effort to craft the tax bill.

Offering a first glimpse into closed-door sessions on tax policy between Trump’s top economic advisers and congressional leaders, the White House official said the sides have yet to agree on whether tax legislation should be “deficit-neutral.” Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan have both called for such neutrality -- meaning that any tax cuts would be offset either by higher revenue from other sources or by spending cuts -- though some of Trump’s advisers have questioned the need for it.

Trump has promised the largest tax cut in history, including the 15 percent corporate tax rate, which would be also be extended to partnerships, limited liability companies and other so-called “pass-through” entities. House Republican leaders, including Ryan, have proposed a 20 percent corporate tax rate and a 25 percent rate for pass-throughs.

The senior White House official’s comments underscore how the biggest hurdle to a tax cut for Republicans is reaching a consensus on whether a bill should be revenue-neutral and, if so, how it should raise revenue to pay for tax-rate cuts.

‘Pipe Dream’

Tax experts have previously said Trump’s 15 percent rate for businesses may be unrealistic. David Rosenbloom, an international tax lawyer at Caplin & Drysdale who served in the U.S. Treasury Department from 1978 to 1981, called the rates suggested by Trump and Ryan “almost certainly a pipe dream” because officials lack an easy way to pay for such large cuts.

During weekly, closed-door tax meetings between Trump’s advisers and congressional leaders, broad tax measures have been discussed, while more specific details will be left to the tax-writing committees, the official said. 

The so-called Big Six -- Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, McConnell, Ryan, Senate Finance Chairman Orrin Hatch and Ways and Means Chairman Kevin Brady -- agree on the need to shift to a territorial system, simplify the tax code and cut rates for the middle class, according to the official.

They remain divided on to what extent companies should be allowed full, immediate expensing of their capital investments, as well as write offs of their net interest expenses on future loans, the official said.

To get around a lack of Democratic support for a tax-code rewrite, Senate Republicans have said they plan to use a legislative maneuver that allows for passing a bill with a simple majority. Under that procedure, however, tax cuts have to be offset so they don’t add to the long-term deficit. Otherwise, the tax changes can only be temporary.

White House officials hope their strategy of letting Congress fill in details of legislation will feel inclusive to Republican lawmakers eager to have their say in what could be legislation that affects almost every American person and business. Attempts to overhaul the tax code have bedeviled presidents of both parties over multiple decades, but a successful effort by Trump would give the president a signature legislative achievement.

The Trump administration is still planning to reach agreement with congressional leaders on a unified tax framework by August, and then figure out the details in September. Assuming they do, Trump is likely to publicly advocate for key elements of the plan in the hope of building support for the legislative process, according to the official. The administration remains hopeful that a final bill can be completed before Thanksgiving, and signed into law before the end of the year, the individual said.

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