U.S. President Donald Trump is proposing to slash the corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought into the United States, officials said late on Tuesday.
THE Trump administration will propose slashing corporate taxes to 15 per cent, from the current maximum of 35 per cent, US Treasury Secretary Steven Mnuchin said.
Mr Mnuchin told CNBC that there was fundamental agreement with Congress on the goals of tax reforms
“Since the 15 per cent has been in the press for the last couple of days, I will confirm that the business tax is going to be 15 per cent,” Mr Mnuchin said at a discussion about the much-anticipated tax plan.
Mr Trump will lay out his plan later today but Mr Mnuchin said it would be “the biggest tax cut and the largest tax reform in the history of our country.”
The top tax rate for individuals would fall by a few percentage points, from 39.6 per cent to the “mid-30s.” That’s according to an official familiar with the plan.
Small business owners would see their top tax rate go from 39.6 per cent to 15 percent, said the official.
Mr Trump proposed the 15 per cent corporate tax rate when he was running for office but many wondered how it could be achieved without raising the deficit.
The plan will also include child-care benefits, a cause promoted by Mr Trump’s daughter Ivanka.
Mr Trump sent his team to Capitol Hill on Tuesday evening to discuss his plan with Republican leaders.
“They went into some suggestions that are mere suggestions and we’ll go from there,” said Republican Senator Orrin Hatch of Utah, chairman of the Senate Finance Committee.
The White House’s presentation will be “pretty broad in the principles,” said Marc Short, Mr Trump’s director of legislative affairs.
Separately, House of Representatives Speaker Paul Ryan said he had seen a “sneak preview” of the plan.
Republicans who slammed the growing national debt under US President Barack Obama have said they are open to Mr Trump’s tax plan, even though it could add trillions of dollars to the deficit over the next decade.
Echoing the White House, Republicans argue the cuts would spur economic growth, reducing or even eliminating any drop in tax revenue.
“I’m not convinced that cutting taxes is necessarily going to blow a hole in the deficit,” Sen. Hatch said.
“I actually believe it could stimulate the economy and get the economy moving,” Sen. Hatch added. “Now, whether 15 per cent is the right figure or not, that’s a matter to be determined.” The argument that tax cuts pay for themselves has been debunked by economists from across the political spectrum.
On Tuesday, the official scorekeeper for Congress dealt the argument – and Mr Trump’s plan – another blow.
The nonpartisan Joint Committee on Taxation said a big cut in corporate taxes, even if temporary, would add to long-term budget deficits.
This is a problem for Republicans because it means they would need Democratic support in the Senate to pass a tax overhaul that significantly cuts corporate taxes.
Republicans have been working under a budget maneuver that would allow them to pass a tax bill without Democratic support in the Senate, but only if it didn’t add to long-term deficits.
Senate Majority Leader Mitch McConnell said the Senate was sticking to that strategy.
“Regretfully we don’t expect to have any Democratic involvement in” a tax overhaul, Sen. McConnell said. “So we’ll have to reach an agreement among ourselves.”
Democrats said they smell hypocrisy over the growing national debt, which stands at nearly $US20 trillion ($27 trillion). For decades, Republican politicans railed against saddling future generations with trillions in debt.
But with Republicans controlling Congress and the White House, there is no appetite at either end of Pennsylvania Avenue to tackle the long-term drivers of debt, Social Security and Medicare. Instead, Republicans are pushing for tax cuts and increased defence spending.
“I’m particularly struck by how some of this seems to be turning on its head Republican economic theory,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee.