WASHINGTON – President Donald Trump is proposing dramatically reducing the taxes paid by corporations big and small in an overhaul his administration says will spur economic growth and bring jobs and prosperity to the middle class.
The White House on Wednesday was to release broad outlines of a tax plan that would cut the top rate for small businesses from 39.6 percent to 15 percent, according to an official with knowledge of the plan. A top rate cut for individuals would be more modest, from 39.6 percent to the “mid-30s,” said the official, who was not authorized to publicly discuss the proposal before the announcement and spoke on condition of anonymity.
White House officials already have said the top corporate tax rate would be reduced from 35 percent to 15 percent. The plan will also include child-care benefits, a cause promoted by Trump’s daughter Ivanka.
In a Wednesday morning speech, Treasury Secretary Steve Mnuchin said the overhaul would amount to “the biggest tax cut” and the “largest tax reform” in U.S. history. The claim suggests the cuts would cut more than $600 billion a year in revenue — or roughly 4 percent of the economy, exceeding the size of President Ronald Reagan’s 1981 tax package.
The White House proposal does not include budget cuts or tax increases that would offset the tax cuts and keep the proposal from increasing the nation’s deficit. It also does not include the so-called border adjustment tax preferred by House leaders. Both omissions left significant doubt over whether the outline would be embraced by Trump’s own party.
The president 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 GOP Sen. 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, Trump’s director of legislative affairs.
In the coming weeks, Trump will solicit more ideas on how to improve it, Short said. The specifics should start to come this summer.
Short said the administration did not want to set a firm timeline, after demanding a quick House vote on a health care bill and watching it fail.
But, Short added, “I don’t see this sliding into 2018.”
Republicans who slammed the growing national debt under President Barack Obama have said they are open to 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,” Hatch said.
“I actually believe it could stimulate the economy and get the economy moving,” Hatch added. “Now, whether 15 percent 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 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, Republican from Kentucky, said the Senate was sticking to that strategy.
“Regretfully we don’t expect to have any Democratic involvement in” a tax overhaul, McConnell said. “So we’ll have to reach an agreement among ourselves.”
President Ronald Reagan’s 1981 tax cut reduced federal revenues by almost 19 percent, according to a Treasury report. In today’s dollars, that would mean a tax cut of more than $600 billion a year — or well over $6 trillion over the next decade.
Democrats said they smell hypocrisy over the growing national debt, which stands at nearly $20 trillion. For decades, Republican lawmakers 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 defense 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.
Added Sen. Bob Casey, Democrat Pennsylvania: “On a lot of fronts, both the administration and Republicans have been contradictory, to say the least.”
“There’s no question we should try to reduce [the corporate tax rate], but I don’t see how you pay for getting it down that low,” Casey said. “Fifteen percent, that’s a huge hole if you can’t make the math work.”