Republicans reportedly eye corporate tax rate of 20%

Figure is higher than Trump's target of 15%; US leader set to give 'more substantive' speech on tax issues this week

Senate Majority Leader Mitch McConnell (second from left) and the rest of the so-called "Big Six" negotiators, are expected to seek a top individual tax rate of 35 per cent, down from the current 39.6 per cent.
Senate Majority Leader Mitch McConnell (second from left) and the rest of the so-called "Big Six" negotiators, are expected to seek a top individual tax rate of 35 per cent, down from the current 39.6 per cent. PHOTO: GETTY IMAGES

WASHINGTON • Republican tax negotiators are targeting a corporate tax rate of 20 per cent, according to two people familiar with the matter. That would be higher than what United States President Donald Trump wants - setting up a key decision for the President on a top legislative priority.

Mr Trump has called for cutting the corporate tax rate to 15 per cent, down from the current 35 per cent.

The plan he will see this week is also expected to recommend cutting the top individual tax rate to 35 per cent, down from 39.6 per cent, two people familiar with the matter said.

Mr Trump will travel to Indiana on Wednesday for a speech on tax issues that is expected to be "more substantive" than recent rallies that were intended to raise enthusiasm for an overhaul, a person familiar with the planning said.

While members of Mr Trump's own administration have suggested that the President's position on the corporate rate might be subject to compromise, he may yet resist a plan with a rate higher than 15 per cent, according to one person familiar with the matter.

The people asked not to be identified because details of the tax plan and Mr Trump's schedule have not been publicly announced.

Mr Trump said on Friday night during a campaign rally in Huntsville, Alabama, that a tax plan would be released this week, and described it as "massive tax cuts".

The White House and Republican congressional leaders are preparing for a push in the next few months to pass tax legislation, after a series of defeats since Mr Trump's inauguration, including their continuing failure to repeal Obamacare. Cutting the corporate tax rate is one of Mr Trump's core principles for an overhaul.

House Speaker Paul Ryan and other congressional leaders have discussed a corporate tax rate in the low- to mid-20s.

Based on recent discussions, the Republican Party will probably aim for a rate in the range of 20 to 24 per cent, said Mr Ryan Ellis, a Republican tax lobbyist who previously worked as chief tax policy director for Mr Grover Norquist's Americans for Tax Reform.

Mr Ellis said he also expects the so-called "Big Six" negotiators to seek a top individual rate of 35 per cent. The Big Six are Treasury Secretary Steven Mnuchin, National Economic Council director Gary Cohn, Speaker Ryan, Senate Majority Leader Mitch McConnell and the chairmen of the congressional tax-writing committees.

Mr Ellis said he expects the framework will call for doubling the standard deduction claimed by many middle-class tax filers, and for repealing the estate tax, which applies only to estates worth more than US$5.49 million (S$7.46 million).

It is unclear how detailed the framework will be - or whether it will represent the unified approach that the President and Republican leaders have sought.

Senate Finance Committee chairman Orrin Hatch, a member of the Big Six, has said he will regard the document as a guide, but his panel will not be bound by it. Nor will his panel be a "rubber stamp" for any particular plan, Mr Hatch said.

The Washington Post reported that Republicans were "targeting" a corporate rate of 20 per cent, citing three unnamed people. But the plan remains fluid, those people told the paper.

The news website Axios reported on Saturday that the members of the Big Six had already agreed to a 20 per cent rate.

House Republicans plan to hold a conference meeting on Wednesday, and public information about the plan is expected shortly afterwards.

Spokesmen for Mr Ryan and for House Ways and Means Committee chairman Kevin Brady - also a Big Six member - declined to comment on Saturday when asked about the reported details of the emerging plan.

While the corporate tax rate will be one of the key decisions, Mr Trump and congressional Republicans have also proposed condensing the existing seven tax rates to three, and cutting the top individual rate to 35 per cent from 39.6 percent.

In recent weeks, Mr Trump suggested he might abandon the plan to cut the top individual rate, and focus instead on a middle-class tax cut. Mr Brady and others, however, said they would prefer to see across-the board tax cuts.


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A version of this article appeared in the print edition of The Straits Times on September 25, 2017, with the headline Republicans reportedly eye corporate tax rate of 20%. Subscribe