GOP leaders and the White House are putting together the pieces of a plan that could make way for a 25 percent corporate tax rate, which would be the lowest since 1940.
Leaders in the White House and on Capitol Hill appear to be well on their way to a 25 percent corporate tax rate, according to a new report from Politico.
The D.C. publication’s Nancy Cook reported on Tuesday morning that top Trump aides and congressional leaders “have made significant strides in shaping a tax overhaul,” with the target being a drop in the corporate tax rate from 35 percent to “between 22 percent and 25 percent.”
A 10- to 13-point drop in the corporate tax rate would cost anywhere from $1 trillion to $1.3 trillion over 10 years. So how does the GOP pay for that, fulfilling Senate Majority Leader Mitch McConnell’s suggestion that tax reform be “revenue-neutral“?
According to Cook (emphases ours):
There is broad consensus, according to five sources familiar with the behind-the-scenes talks, on some of the best ways to pay for cutting both the individual and corporate tax rates.
The options include capping the mortgage interest deduction for homeowners; scrapping people’s ability to deduct state and local taxes; and eliminating businesses’ ability to deduct interest, while also phasing in so-called full expensing for small businesses that allows them to immediately deduct investments like new equipment or facilities.
Estimates vary, but of these ideas:
- Capping the mortgage interest deduction – potentially to $500,000 – could save $40 billion to $80 billion over 10 years
- Eliminating the state and local tax deduction is a big one; one March 2017 estimate found it could save $1.3 trillion from 2017 to 2026
- Eliminating “the deductibility of interest” could save between $30 billion and $500 billion over 10 years under the Trump plan
Add all of this up, and the tax reform team is looking at $1.4 trillion to $1.9 trillion of 10-year savings. That could easily pay for a 25 percent – or 22 percent – corporate tax rate, and smaller individual tax breaks.
The corporate tax rate hasn’t been under 30 percent since 1940.
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