President Trump recently announced that he plans to make radical changes to our tax code, and he made it clear that these chances would include dramatic alterations to the U.S. corporate income tax rate.
Not only does President Trump’s tax plan aim to make it more attractive for international businesses to bring overseas profits into the United States, he also wants to slash the corporate tax rate as much as possible. Trump wants to implement these changes as quickly as he can because of all the publicity surrounding his first 100 days in office and the fact that other platforms on which he ran during the campaign (building a wall, repealing Obamacare, etc.) have struggled to gain traction in Congress.
Trump’s tax plan proposes cutting the corporate income tax rate to 15% from 35%, and he wants multinational corporations to be taxed at a rate of 10% instead of 35% to provide those companies with an additional incentive to bring their money into the United States. Trump also wants to pass a sharp cut in the top-tier tax rate for pass-through businesses. These companies (i.e. sole proprietorships, small business partnerships, etc.) would see their taxation rate fall from 39.6% to 15% if President Trump’s plan is approved.
Republicans had earlier submitted a tax plan proposal that included a border adjustment tax on imports, but President Trump did not include this addendum in his proposal. Trump’s proposal appears to fall short of what many Republican lawmakers were hoping for, but his advisers have said that it is only meant to serve as a guide for lawmakers in the House and the Senate.
The House Republican plan only called for a 20% corporate tax rate as opposed to Trump’s 15% suggestion. Their plan also made imports somewhat prohibitive while strongly encouraging exports.
Trump’s tax plan also calls for capping the individual tax rate at 33%, and he would like to see estate and alternative minimum tax rates cut in order to benefit the middle class. What’s yet to be seen is if the President will include provisions for funding infrastructure or child tax credits, and many analysts believe that such provisions could help him win enough Democratic votes to pass his plan.
One question that has formed in the minds of many lawmakers and taxpayers is, “How can President Trump lower taxes without adding billions of dollars to the national debt?” Treasury Secretary Steve Mnuchin believes that the tax cuts will eventually pay for themselves by generating more economic growth and jobs. Mnuchin told reporters this week after leaving the Capitol that there is “no question” that both the administration and Republicans agree on the fundamental principles of U.S. tax reform. Mnuchin also said that Trump would prefer to see his tax reform plan passed before winter.
One criticism that has been levied against President Trump regarding his tax plan is that it would benefit him personally. Frank Clemente is the executive director of Americans for Tax Fairness, a Democratic activist group, and Clemente believes that Trump’s tax plan proposal to lower rates for pass-through companies is designed to lower the amount Trump himself pays each year. “In trying to slash taxes for pass-through business entities, Trump is seeking to dramatically reduce his own tax bill,” said Clemente. However, Clemente failed to note that the majority of U.S. companies are pass-through corporations.
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