Adds details throughout
President Donald Trump's tax plan would cut corporate rates to 15pc but not include a contested border adjustment tax that refiners have warned would raise energy prices.
The tax plan, outlined today in a one-page document, would target the existing top corporate tax rate of 35pc, eliminate taxes on income earned overseas and remove unnamed "tax breaks for special interests." It also seeks a one-time repatriation tax on corporate earnings held overseas, along with lower tax rates on personal income taxes and small businesses.
Aside from eliminating tax breaks, Trump's plan offers no revenue offsets to make up for what could be trillions of dollars in tax cuts. US treasury secretary Steven Mnuchin today said he could not provide details about how much the tax plan would cost but said its goal was to drive economic growth rates to 3pc, up from 1.6pc last year.
The plan leaves out a proposed border adjustment tax backed by US House of Representative speaker Paul Ryan (R-Wisconsin) and House Ways and Means Committee chairman Kevin Brady (R-Texas). That proposal would have generated an estimated $1 trillion over the next decade by taxing US corporations on imports and domestic sales while eliminating taxes on exports. US refiners that rely on crude imports opposed the tax because they said it would increase gasoline prices and disrupt supply chains.
"We do not believe it works in its current form," Mnuchin said of the border tax at an event the newspaper The Hill hosted in Washington, DC. "We are continuing to have discussions with [Ryan and Brady] on revisions they will consider.
Trump's tax plan also does not address Ryan's plans to eliminate a prized tax deduction on interest payments or to allow immediate expensing on capital investments, two major issues for the energy sector that could change the overall cost of the tax plan. Mnuchin said the administration today was only outlining "core principles" on tax policy and would work out details later.
Cutting tax rates without a corresponding increase in revenues would make it more difficult for the measure to pass 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.
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 and other revenue-generating parts of Ryan's tax plan could create friction with Republican leaders in the House who have spent the last six months touting the benefits of their plan.
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."
Trump's plan to slash tax rates without paying for lost revenue is leading to expectations that Republicans can only pass a temporary tax cut, rather than a comprehensive tax policy overhaul.
"What I do not want to see is that this tax reform will be paid for by magic," non-profit group the Committee for a Responsible Federal Budget president Maya MacGuineas said today.
Ryan today said House leadership is 80pc in agreement with the White House on the tax plan and is "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 is considering.
