Trump Pursuing a 15% Corporate Tax Rate
In the words of Ron Swanson: SLASH IT. SLASH IT.
President Donald Trump has offered us a little hint into the tax reform plan he wants to unveil on Wednesday. He has demanded aides to draft a plan that cuts the corporate tax rate to 15%.
It would help him keep one of his campaign promises. On the trail, he vowed to bring the tax rate to 15% from 35%. Yet, it could cause a fight on Capital Hill. Republicans want to cut taxes, but they cannot agree on how much.
The government can easily solve this problem if they would stop spending so much money. After all, as Kemberlee blogged, Americans will spend more on taxes than food, clothing, and housing combined in 2017.
Trump needs all Republicans on board because we all know Democrats will not support anything his administration proposes. It’s why the healthcare reform bill failed. A lot of Republicans in Congress refused to support it and Ryan could not even bring it to the floor. Bloomberg reported:
While Trump and Ryan broadly agree on sharply cutting individual income and corporate taxes, there are areas of disagreement between the two. On the campaign, Trump called for a corporate tax rate of 15 percent; Ryan wants 20 percent, and he has warned that cutting it an additional 5 percentage points could prevent the ultimate tax plan from being revenue neutral. Without Democratic support, a plan would have to be revenue neutral to meet the criteria set by lawmakers to make tax changes permanent.
“I’m not sure he’s going to be able to get away with that,” [Senate Finance Committee Chairman Orrin] Hatch told reporters Monday. “You can’t very well balance the budget that way.”
Treasury Secretary Steven Mnuchin and economic adviser will speak with Ryan, Senate Majority Leader Mitch McConnell, House Ways and Means Committee Chairman Kevin Brady, and Hatch.
Mnuchin will discuss the tax reform efforts at an even hosted by The Hill at the Newseum on Wednesday from 8-9:35AM ET.
Growth
Mnuchin spoke to reporters about the tax plan:
Asked Monday if the president’s tax plan would be revenue-neutral, meaning it wouldn’t add to the debt, Mr. Mnuchin told reporters that it would “pay for itself with economic growth.” By that he meant that the administration expects to be able to project faster growth due to tax cuts, which would in turn increase revenue and avert the risk of bigger budget deficits. Many economists doubt whether economic growth can ramp up on a sustained basis without a big pickup in productivity and labor-force growth, and it is uncertain the tax-policy changes would do that.
Jared Bernstein, economic advisor to former Vice President Joe Biden, disagrees with Mnuchin:
“They will lose a boatload of revenue that we can’t afford to lose and far more than this team will offset by closing loopholes,” said Jared Bernstein, who was an economic adviser to former Vice President Joe Biden. Cutting marginal tax rates for businesses could generate some economic growth, he said, but not nearly enough to pay for itself with increased revenue.
“These promises about all kinds of growth and investment that are going to be triggered by these tax cuts never appear, and the empirical historical record is clear on that,” Mr. Bernstein said.
Trump released a tax plan as a candidate, which the Tax Policy Center analyzed in November. It concluded that his plan, “coupled with a repeal of the corporate Alternative Minimum Tax, could reduce revenue by $2.4 trillion in the first decade.”
However, Mnuchin is correct. It can pay for itself with economic growth. Let me explain this to those who hate big businesses and evil corporations.
The less taxes companies have to pay, the more those in charge can invest into the companies. Therefore, it will allow the company to grow, thus creating jobs. It allows the company the flexibility it needs to be competitive.
More jobs means more people in the workforce. This gives people more money, which they can spend and put into the economy.
Yes, it’s that simple. It will not happen overnight, but it will happen. Also, the government would not need so much money if it would STOP SPENDING. But I forgot. Private companies and people must budget and cut spending if they have no money. Not the government.
Or how about this scene from the movie Dave?
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Comments
love that scene from Dave.
Me too! Whenever tax reform comes up I always think of that scene. Also the scene where he brings in his friend. “I like bratwurst…”
The gutless wonders in Congress will screw it up even though this would level the playing field a small bit between large and small business.
This would go along ways to create American jobs and stop sending corporate HQs overseas too.
Exactly. Unfortunately they and s lot of Americans do not have patience. They want results now. To do it the proper way that I mentioned would take time.
Funny, when they want revenue neutral, spending cuts never enter the discussion.
But yet we’re lectured to cut spending in our personal lives when we run low on money.
Right. Oregon (for example) is seeing a $1.6 BILLION* budget deficit they’re now trying to make up. The leftist governor, to her credit, is ordering agencies to reduce spending where possible and to do more with less.
The SEIU, on the other hand, is flipping their collective lid over it, claiming that state employees are always on the hook when the government overspends and we should contact our legislators NOW to put a stop to it. In lieu of reducing spending, we should instead be raising Oregon’s “lowest in the nation”** corporate tax rate.
Fact is, the only part of the governor’s orders that directly affects state employees, is a hiring freeze — which will only last two months and only cover non-essential positions; there are exemptions for business-critical jobs that need to be filled immediately. The freeze is a tiny part of a multi-faceted approach to reducing spending.
And reducing spending is one of the very few things this governor has recommended that I actually agree with.
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* – Don’t get me started on how a state with 4.1 million (with an ‘M’) people could have a budget shortfall of $1.6 BILLION (with a ‘B’).
** – Yep, they claimed that. Problem is, it’s demonstrably untrue, as anyone with 10 seconds to spend on Google can tell you.
For the ’17-’19 budget (Connecticut does a two year budget) CT is looking at a possible worst case scenario of a defict in the neighborhood of $4B. I’ve been hearing $3.4B and $3.6B on the news the last few weeks.
So far the suggestions they are floating for it seem to be all tax increases, raising the sales tax from it’s current 6.35% to 6.99%, almost back to the pre-state-income-tax rate of 8%, raising taxes on the wealthy (surprise), and letting municipalities tax 100% rather than 70% of assessed value for property taxes. The only way that latter suggestion would help the state is if Hartford sees it as a way to send even less money back to the towns. And of course insane property tax rates won’t discourage any businesses from moving here.
My town is currently looking at an up to $14M cut in monies from the state (which is almost 10% of our entire budget) because of a faulty method of deciding state support for local education. We’re fighting it, and planning on a $5M decrease, and of course residents want a) no cuts in the school budget (which is ovr 60% of the town budget to begin with), b) no cuts to other programs and c) no tax increases. I’m not sure how they think that’s going to happen.
One of the concerns lately have been “inversions” into other countries for the tax benefits. This will help stem that tide, and it is a better way to do that than to punish. We want to be the country companies invert *to* instead of from.
Of course, dKos is apoplectic over corporations “paying their fair share”, got an email right before I started reading about it all here.
Someone needs to force the CBO to start using Dynamic Scoring to account for the fact that people change their behavior when tax rates change.
That may be the answer – with control of both houses of Congress, the Republicans should be able to mandate dynamic scoring. Indeed, my memory (admittedly somewhat flaky these days) is that they did this at some point in the past, which would imply that the Dems switched it back. In any case, static scoring provides a built in bias for increased taxation and increased govt spending.
Why tax corporate income at all? So long as revenue remains in the corporation it’s working, and is not available to the shareholders; it should only be taxed when it reaches the shareholders’ hands in the form of dividends or capital gains (which should be taxed at the ordinary rate, not a concessional rate, but indexed for inflation).
EXACTLY! I’m all for the elimination of the corporate tax rate and repealing the 16th Amendment. 🙂 But I’ll take what I can get and hopefully chip away some more.
This is needed. If Corporations overseas are taxed at an average of 12-20%, and the United States wishes to remain competitive, then USA tax rates ought to remain competitive.
Paired with the border adjustment tax, I don’t see how anybody can complain.
Oh, but the leftists will complain.
Cutting taxes on producers and employers works, but that’s not why they’ll complain.
They’ll complain because it takes time; we won’t see an immediate, instant positive effect. We WILL see an immediate, short-term budget shortfall before corporations realize we’re serious and adjust accordingly.
But leftists like them some instant gratification. Raising taxes raises money now, but hurts later. Cutting taxes loses money now, but more than makes up for it later.
However, leftists are not usually known for looking at “later”, are they?
The corporate income tax should be abolished. See the period?
It has always been a means to simply tax Americans in general more, and by deception. It’s corrupt AND destructive.
That said, and while I’m all for tax cuts, without a concurrent cut in spending the net result will be MORE debt to pass along. That is also corrupt and destructive.
The progressive fascits need the private sector to fail because it is the alternative to their Socialist Utopia. When it fails there will be millions of poor desperate people who are vulnerable to their lies. The 2008 disaster shows how this works. It allowed them to lie their way into power.