Wednesday, April 26, 2017

Trump’s 15% Corporate Tax Rate Could Cost The Government $2 Trillion

President preparing to roll out tax package on Wednesday.

By Robert Schroeder
April 26, 2017

If President Donald Trump does propose slashing the U.S. corporate tax rate to 15%, as reports have suggested, one estimate is that it could cost the government some $2 trillion in lost revenue.

Trump is preparing to roll out what he’s called a “big tax reform and tax reduction” package on Wednesday, and one of the details that has leaked out is cutting the corporate rate to 15% from 35%. Businesses and politicians regularly decry the 35% rate, though corporations often pay effectively less in taxes via deductions and credits.

Trump has told staff he wants a major tax cut to sell to Americans, and it was less important to him if the plan loses revenue, The Wall Street Journal reported Monday.

Under the corporate plan, losing revenue is exactly what would happen, according to an analysis done by the Tax Foundation during the campaign. Trump’s 15% number matches his campaign proposal, and that rate would cost the federal government $2.1 trillion over 10 years, according to the foundation’s estimate.

The estimate shrinks when accounting for growth that would result from tax cuts, but still comes in at just over $1 trillion over 10 years, the same estimate found.

Projected revenue loss of that magnitude is almost certain to be a non-starter for deficit hawks on Capitol Hill, and analysts are already predicting that Trump’s corporate number could come down in negotiations.

“We doubt he can get the top corporate rate down to 15%, as he apparently will propose [Wednesday], but this is how he deals,” writes Greg Valliere of Horizon Investments. “Shoot for 15% but take 20% in negotiations — still a dramatic reduction from the present 35% top rate.”

During the campaign Trump also criticized the growing national debt. But his tax cuts could wind up increasing it even more.

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