President Trump has instructed advisers to drastically cut the corporate tax rate even though doing so will expand the deficit and grow the national debt, sticking to one of his campaign pledges but shattering another.
Trump instructed advisers last week that he wants the corporate tax rate to be lowered from 35 percent to 15 percent, a senior White House official said, speaking on the condition of anonymity. This is the same rate that Trump pursued during his 2016 campaign, but officials had not signaled since the election whether he would stick to the pledge.
By doing so — but not committing to measures that would offset the revenue loss — Trump is making clear he is putting a priority on cutting taxes over the national debt. It also potentially creates a tension point with House Republicans, who have spent years advancing a vision for tax restructuring of their own.
The White House decision comes at a crucial time. White House officials plan to unveil the broad principles of their tax plan Wednesday, though details of what would be in the release remained fluid Monday, another White House official said.
When Trump proposed the 15 percent rate during the campaign, the nonpartisan Tax Policy Center projected that this would reduce federal revenue by $2.4 trillion over 10 years. But White House officials have said that the tax cuts will create such a jump in economic growth that it will create new revenue, an assumption that has divided experts.
“The tax plan will pay for itself with economic growth,” Treasury Secretary Steven Mnuchin said Monday.
The Wall Street Journal first reported Trump’s request to cut the corporate tax rate to 15 percent Monday afternoon.
Businesses are projected to pay $340 billion in corporate taxes in 2018, roughly 10 percent of all revenue collected by the government.
If the amount of taxes paid by businesses falls, it could put more pressure on other taxpayers to make up the difference. But Trump has said he wants to put in place a “massive” cut for the middle class, which means all tax revenue could fall. This would expand the budget deficit unless there is a giant contraction in federal spending, which so far has not been proposed.
At 35 percent, the United States has one of the highest corporate tax rates in the world, but most companies pay a much lower effective rate because the tax code is riddled with deductions. Still, lawmakers from both parties have said the corporate tax rate must be reduced to make the United States more competitive.
Talking to aides, Trump underscored the need for the tax plan to include sweeping cuts for both corporations and individuals and did not focus on or express extensive concern about revenue issues or the deficit. As one of the officials described Trump’s outlook, “he wants high growth and high employment.” full story