Treasury Secretary Steven Mnuchin and National Economic Director Gary Cohn confirmed rumors that President Donald Trump is sticking to priorities outlined during this election campaign to slash the current 35 percent corporate tax rate by 20 percentage points.
“We will have a massive tax cut for business and massive tax reform and simplification,” Mnuchin said. “The president is determined to unleash economic growth for businesses."
Another significant change that the White House is proposing is a shift to a territorial tax system under which income earned abroad would not be taxed within the U.S. Under the current worldwide system, U.S. corporations are required to pay taxes on all income, regardless of where it is earned.
Mnuchin and Cohn also reiterated Trump’s campaign wish list to allow for a Repatriation of Corporate Income Stored Overseas.
The standard deduction will be doubled to benefit the middle class. However, this benefit would be greatly diminished if it is accompanied by the elimination of certain personal tax exemptions as well, as it was in Trump’s tax package released on the campaign trail.
Trump’s plan is silent on the controversial border adjusted tax proposal floated by the House Republicans that is expected to raise approximately $1.2 trillion in revenue by disallowing deductions for import expenses. The BAT has been staunchly opposed by import-heavy retailers and Trump has waffled on the idea in the past few months, labeling it as too complicated.
Democrats are opposed to such significant tax cuts that they say will benefit the wealthiest at the expense of lower-income people, and so, any tax reform bill introduced in Congress will have to be revenue-neutral without raising deficits beyond a 10-year window so that it can satisfy a Senate rule allowing certain measures to pass with a bare majority.
Senate Democratic Leader Chuck Schumer, D-N.Y., said in a statement that Democrats will oppose any proposal from the president that gives massive tax breaks to “the very wealthy” while exploding the deficit.
The White House administration has said that the tax cuts would be paid for through economic growth, but the Tax Foundation, a nonpartisan, right-leaning think tank, has said that cutting the corporate income tax rate to 15 percent alone would reduce federal revenues by about $2 trillion over a decade and the economy would have to grow by an unrealistic 5 percent.
But also see our April /25/17 post Tax Reform Announcement Coming on April 24 but Tax Reform Is 'Impossible' This Year - So Where Does That Leave Tax Advisers? where we discuss that there may not be enough time to get the tax bill passed in 2017. Warren Payne, a former House Ways and Means Committee policy director now with Mayer Brown LLP, believes that passing tax reform by August will be ‘‘impossible’’ this year. Rather, he suggested during a conference call March 16 that it is more likely to be addressed in early 2018.
The New York Times