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Trump, GOP May Find a Way to Make the Corporate Tax Rate Lowest Since 1940

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.

Paul Ryan and tax reform

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:

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.