As promised the Trump administration is proposing “massive tax cuts and tax reform”.
Treasury Secretary Steve Mnuchin confirmed Wednesday that the Trump administration aims to lower business tax rates to 15 percent, saying a forthcoming proposal will constitute the “biggest tax cut” for Americans in history.
“This is going to be the biggest tax cut and the largest tax reform in the history of our country,” Mnuchin said, as administration officials prepare to outline Wednesday afternoon what he described as “principles” of their tax plan.
Mnuchin, speaking at a Washington forum, would not reveal many specifics but confirmed that they want to lower the business rate to 15 percent.
“I will confirm that the business tax is going to be 15 percent,” he said. “[Trump] thinks that’s absolutely critical to drive growth.”
He indicated that the rate for small businesses and the corporate tax would both drop to 15 percent. The top small business rate is 39.6 percent; the current corporate tax is 35 percent.
Mnuchin also said the administration wants to “do the whole thing,” and not pursue tax reform piece by piece. Amid concerns that such sweeping tax cuts would significantly reduce revenue for the government, he suggested economic growth will help pay for the plan.
But there is no current plan to increase revenue to make up a massive shortfall.
The plan, though, is likely to run into tough questions from Democrats and some fiscal hawks about the impact on the federal deficit and national debt.
On Tuesday, the official scorekeeper for Congress dealt a blow to the argument that tax cuts pay for themselves.
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.
US tax rates are relatively high and that encourages tax avoidance, so they could attract business back into the US.
They hope that the tax cuts will pay for themselves with economic growth – and at the same time want to clamp down on trade. A huge gamble.