26.04.2017, 19:33
Trump tax plan rejects contested border provision
OREANDA-NEWS. President Donald Trump's plan for a comprehensive tax overhaul would cut corporate rates to 15pc but will not include a controversial border adjustment tax that US refiners warned would raise energy prices.
US treasury secretary Steven Mnuchin said although the administration likes some aspects of the border adjustment tax backed by US House speaker Paul Ryan (R-Wisconsin), it will not be in its tax plan. The White House today plans to release details of the plan, which the administration hopes will unite Republicans around the first comprehensive tax change in more than 30 years.
"We do not believe it works in its current form," Mnuchin said at an event the newspaper The Hill hosted in Washington, DC.
Trump's tax plan would lower corporate rates from an existing top line rate of 35pc, while also reducing tax rates on personal income and small businesses. Mnuchin said the tax plan would not address infrastructure, an idea that was being considered as a way to build bipartisan support, and instead would have a central goal of stimulating the economy.
"The business tax is going to be 15pc," he said. "That is what [Trump] said in the campaign, he thinks that is absolutely critical to drive growth."
But cutting tax rates without a corresponding increase in revenues would make it more difficult for the measure to pass through the US Senate using a parliamentary maneuver called reconciliation. That tactic allows measures to pass the Senate with just 51 votes, instead of the usual 60 needed to end debate on most bills. But if the tax cuts are projected to add to the deficit after 10 years, Republicans would have to make the tax reductions temporary to align with the rules of reconciliation.
The proposed border adjustment tax would have generated an estimated $1 trillion over the next decade and helped Republican leaders pay for their plan to cut corporate tax rates to 20pc. The plan would have taxed US corporations on imports and domestic sales, while removing taxes on all exports.
US refiners that rely on imported crude opposed the tax, which they said would increase gasoline prices and disrupt supply chains. Trump's tax plan instead assumes cutting rates would drive economic growth and make up for some of the lost tax revenue.
But removing the border tax could create friction with Republican leaders in the House who have spent the last six months touting its benefits.
Ryan's senior tax counsel George Callas last week said reducing business tax rates with no offsets was "not a real thing" and could "not even begin to move through Congress." Callas said the tax cuts could only be in place for two years before adding to the deficit in the next decade, a change he said was akin to "dropping cash out of helicopters onto corporate headquarters."
Mnuchin did not offer details on other parts of the plan that would raise revenue, creating concerns that it could add to trillions of dollars to budget deficit if growth projections do not materialize.
"What I do not want to see is that this tax reform will be paid for by magic," the non-profit group the Committee for a Responsible Federal Budget's president Maya MacGuineas said today.
Mnuchin said the administration would continue discussions with Ryan and House Ways and Means Committee chairman Kevin Brady (R-Texas) on potential revisions.
Ryan today said House leadership was 80pc in agreement with the White House on the tax plan and was "in the same ballpark" on the remaining 20pc. The border adjustment tax "needs to be modified" to avoid creating shocks in the economy, Ryan said today, but he did not detail what revisions he was considering.
US treasury secretary Steven Mnuchin said although the administration likes some aspects of the border adjustment tax backed by US House speaker Paul Ryan (R-Wisconsin), it will not be in its tax plan. The White House today plans to release details of the plan, which the administration hopes will unite Republicans around the first comprehensive tax change in more than 30 years.
"We do not believe it works in its current form," Mnuchin said at an event the newspaper The Hill hosted in Washington, DC.
Trump's tax plan would lower corporate rates from an existing top line rate of 35pc, while also reducing tax rates on personal income and small businesses. Mnuchin said the tax plan would not address infrastructure, an idea that was being considered as a way to build bipartisan support, and instead would have a central goal of stimulating the economy.
"The business tax is going to be 15pc," he said. "That is what [Trump] said in the campaign, he thinks that is absolutely critical to drive growth."
But cutting tax rates without a corresponding increase in revenues would make it more difficult for the measure to pass through the US Senate using a parliamentary maneuver called reconciliation. That tactic allows measures to pass the Senate with just 51 votes, instead of the usual 60 needed to end debate on most bills. But if the tax cuts are projected to add to the deficit after 10 years, Republicans would have to make the tax reductions temporary to align with the rules of reconciliation.
The proposed border adjustment tax would have generated an estimated $1 trillion over the next decade and helped Republican leaders pay for their plan to cut corporate tax rates to 20pc. The plan would have taxed US corporations on imports and domestic sales, while removing taxes on all exports.
US refiners that rely on imported crude opposed the tax, which they said would increase gasoline prices and disrupt supply chains. Trump's tax plan instead assumes cutting rates would drive economic growth and make up for some of the lost tax revenue.
But removing the border tax could create friction with Republican leaders in the House who have spent the last six months touting its benefits.
Ryan's senior tax counsel George Callas last week said reducing business tax rates with no offsets was "not a real thing" and could "not even begin to move through Congress." Callas said the tax cuts could only be in place for two years before adding to the deficit in the next decade, a change he said was akin to "dropping cash out of helicopters onto corporate headquarters."
Mnuchin did not offer details on other parts of the plan that would raise revenue, creating concerns that it could add to trillions of dollars to budget deficit if growth projections do not materialize.
"What I do not want to see is that this tax reform will be paid for by magic," the non-profit group the Committee for a Responsible Federal Budget's president Maya MacGuineas said today.
Mnuchin said the administration would continue discussions with Ryan and House Ways and Means Committee chairman Kevin Brady (R-Texas) on potential revisions.
Ryan today said House leadership was 80pc in agreement with the White House on the tax plan and was "in the same ballpark" on the remaining 20pc. The border adjustment tax "needs to be modified" to avoid creating shocks in the economy, Ryan said today, but he did not detail what revisions he was considering.
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