Corporate tax reform negotiators aim above Trump’s 15 percent pledge

WASHINGTON (Reuters) – President Donald Trump campaigned on cutting the U.S. corporate tax rate to 15 percent, but administration officials said on Monday negotiators engaged in closed-door talks are now shooting for a little over 20 percent because they realize the super-low rate would balloon the federal deficit.

Republican leaders in the House of Representatives and the Senate are unlikely to allow the budget deficit to grow, so officials said they now hope for a corporate tax at the low end of a 20 percent to 25 percent range.

“It’s going to be truly deficit neutral,” House Ways and Means Committee Chairman Kevin Brady told reporters. “We’re going for permanence. That means our reforms have to balance in the budget.”

Six months into Trump’s presidency, Republicans who control House, Senate and the White House have yet to agree on important features of a tax code overhaul. Under Senate rules, Republicans who want to take advantage of their simple majority and pass tax legislation without Democratic support must show the new policies will not add to the federal deficit after 10 years.

Cutting the corporate tax rate to 15 percent from a current 35 percent would cost more than $2 trillion over a decade, according to independent analysts, and that total would be hard to offset when proposals to raise revenue face broad political opposition.

“I don’t think there are $2 trillion of politically saleable offsets on the corporate side of the ledger,” said Rohit Kumar, a former aide to Senate Republican leader Mitch McConnell who now serves as a principal in the tax policy group at the consulting and accounting firm PwC LLP.

Two House Republican proposals could help pay for such a reduction: a border adjustment tax and a proposed elimination of business deduction of debt interest payments. But these face broad opposition from industry and many Republican lawmakers.

Administration officials hope the negotiators will agree on a plan by the end of July, convert it to…

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