US corporate tax goal in doubt as Donald Trump intensifies reform drive

US President Donald Trump delivers remarks on his proposed changes to the tax code during an event with energy workers at the Andeavor Refinery in Mandan, North Dakota, US on Sept 6, 2017.
US President Donald Trump delivers remarks on his proposed changes to the tax code during an event with energy workers at the Andeavor Refinery in Mandan, North Dakota, US on Sept 6, 2017.PHOTO: REUTERS

WASHINGTON (REUTERS) - US Treasury Secretary Steven Mnuchin on Tuesday (Sept 12) cast doubt on President Donald Trump’s goal of cutting the corporate tax rate to 15 per cent, even as the president moved to inject new urgency into a sluggish effort in Congress to lower taxes. 

“Ideally, he’d like to get it down to 15 per cent. I don’t know if we’ll be able to achieve that given the budget issues, but we’re going to get this down to a very competitive level,”Mnuchin told a conference in New York hosted by CNBC. 

The president is cranking up a publicity campaign to build public support for his general goals of lower and simpler taxes, dining at the White House on Tuesday with six senators including three Democrats who set clear conditions for future cooperation with him on the issue. Also attending were Vice President Mike Pence, White House economic adviser Gary Cohn and Mnuchin.

The Trump administration nor the Republicans who control Congress have agreed on a detailed plan for overhauling the tax code despite months of discussions. A major concern is not adding to the federal budget deficit. It would balloon if tax rates were cut too deeply without providing offsetting federal spending reductions and closure of tax loopholes, both politically difficult tasks.

Mnuchin declined to say what business tax rate was achievable. He said he was “incredibly hopeful” a tax plan could be enacted this year, adding it could be retroactive to January.

Asked whether Trump would hold out for a 15 per cent corporate tax rate, compared with the current 35 per cent, White House spokeswoman Sarah Sanders said: “The president is prepared to push for as low of a rate as we can get. We’re going to continue to push for that and work for Congress to make sure we get the best deal possible.”

Pennsylvania Republican Senator Pat Toomey, one of those at the White House dinner, said on a conference call later that Trump talked about competitive business taxes, ending taxation of US corporations’ foreign profits, and a middle-class tax cut. 

Later, the Democrats expressed an openness to working with Trump on taxes, but stressed certain conditions. West Virginia Democrat Joe Manchin said in a statement he would continue to fight for a simpler tax code, but “we must do this without adding to our staggering debt”. North Dakota Democrat Heidi Heitkamp said in a statement the dinner was a “good discussion” and that she told the president any tax package must support working families and farmers.

Overhauling the tax code was one of Trump’s main campaign promises in 2016, but he has made little progress toward it. After nearly eight months in office, he has yet to win passage in Congress of any major domestic policy legislation. 

Besides Manchin and Heitkamp, others at the dinner were Indiana Democrat Joe Donnelly and three Republicans: Senate Finance Committee Chairman Orrin Hatch and fellow tax panel Republicans John Thune and Toomey. Donnelly said in a statement: “Tax reform should include measures to support companies that invest in our workers and penalize companies that ship American jobs to foreign countries.” 

Republican Paul Ryan, the Republican speaker of the House of Representatives, said last week that “the numbers are hard” to make Trump’s 15-percent corporate tax rate target work. Ryan set his own goal at around 22.5 per cent.

Financial markets rallied after Trump’s election victory last November in anticipation of rapid tax cuts, especially for corporations, but those expectations have faded. 

“The likelihood of passing sweeping corporate reform has diminished,” Jack Ablin, chief investment officer at BMO Wealth Management, said in a research note.