WASHINGTON – President Donald Trump has instructed his advisers to make cutting the corporate tax rate to 15 percent a centerpiece of his tax-cut blueprint, according to people with knowledge of his plans, even if that means a significant reduction in revenue that could jettison his campaign promise to curb deficits.
Cutting the corporate tax rate to 15 percent from its current 35 percent level was one of Trump’s marquee campaign promises, part of his vision of carrying out “maybe the biggest tax cut we’ve ever had.” But he has yet to publicly embrace the move since taking office, and his decision to do so now could set up a showdown with Congress over a proposal that would most likely blow up the deficit.
The White House is planning to formally roll out its tax plan Wednesday, ending months of speculation about the president’s intentions for rewriting the tax code and following a prolonged period of confusion in which he and his top advisers sent mixed messages about what elements they favored and how the tax cut would be structured. The people who described Trump’s corporate tax cut target, first reported by The Wall Street Journal on Monday, did so on the condition of anonymity because they were not authorized to discuss it before an official announcement.
The president plans to unveil the tax cut during a week when Republicans will be trying to pass a spending measure needed to keep the government from shutting down. Repealing and replacing the Affordable Care Act remains a legislative priority, although whether it is considered more important than a tax overhaul changes frequently.
The 15 percent rate is lower than what House Republicans proposed in the tax cut blueprint being pitched by House Speaker Paul Ryan, and it could be difficult to move through Congress.
The powerful chairman of the Senate finance committee said Tuesday that he was prepared to support Trump’s plan to cut corporate tax rates to 15 percent even if it added to the budget deficit.
Sen. Orrin G. Hatch, R-Utah, is a critical voice on tax issues in Congress and support from him could make the difference in whether members of Congress fall in line and support the president’s proposal.
Republicans in Congress have generally been against tax cuts that add to the deficit. But many argue that now is the party’s opportunity to bring sweeping and enduring changes to the tax code.
“I’m open to getting this country moving,” Hatch said. He said that if the tax cut could stimulate the economy, then he was not as bothered by the impact it had on budget deficits. “I’m not so sure we have to go that route, but if we do, I can live with it,” Hatch said.
The nonpartisan Tax Policy Center estimated last year that the corporate tax cut plan Trump had proposed, which at the time included the repeal of the alternative minimum tax, would cost $2.4 trillion over a decade. Still, Steven Mnuchin, the secretary of the Treasury, said Monday that he was confident the administration’s tax proposal would “pay for itself” through economic growth. He said a growth rate of 3 percent was achievable.
Mnuchin also said the Trump administration would lay out plans to cut middle income tax rates, simplify the tax code and make U.S. companies more competitive with foreign ones.
Meanwhile, the Trump administration has dropped any support for a so-called border adjustment tax on imports, according to two people who have been briefed on the matter.
The tax was intended to be the keystone of a tax reform proposal developed by Republican leaders in the House of Representatives. But it faced immense pushback from influential companies including Wal-Mart and Toyota.
If enacted, a border adjustment tax would have effectively imposed significant levies on billions of dollars of imported goods. Retailers in particular would have been hard hit, as products ranging from tires to T-shirts, which are imported from overseas, would have suddenly cost more. Automakers and other manufacturers that rely heavily on foreign parts and supplies would have also been hit.
The border tax may be revisited later, one of these people said, but it was shelved ahead of the Wednesday release of the White House’s new tax plan. A White House spokeswoman, Lindsay Walters, did not respond to requests for comment. Trump had always seemed ambivalent toward the border tax.
There are also lingering questions about what shape the rest of the plan will take, and even about the timetable for pushing it through. Trump has said that he still believes a health care overhaul effort that collapsed last month must be completed before the plan to rewrite the tax code can advance.
White House officials declined to comment on the 15 percent targe for the corporate ratet, which people close to the administration cautioned could change between now and the announcement Wednesday, perhaps repeatedly. They warned that the details were sketchy at best, and others who have discussed the tax overhaul plan with administration officials recently said there was still indecision at the highest levels about what elements to include and in what form.
The Wednesday deadline, set hastily by Trump last week in a comment that appeared to take some of his closest advisers off guard, was an effort to showcase an ambitious plan for economic growth during his first 100 days in office. During the campaign, he promised to introduce a tax cut proposal to Congress in the first 100 days. But he has had no major legislative achievements to point to as evidence of an activist economic agenda.