WASHINGTON — Slash corporate taxes and hope the resulting bounce in economic growth brings in enough government revenue to stop the budget deficit from ballooning.
This is the centerpiece of a sweeping new tax policy outline that President Donald Trump is due to unveil Wednesday.
The move will come with the 100-day mark of Trump’s young presidency fast approaching and Congress working to pass spending legislation to avoid a government shutdown Friday night. Officials have described Wednesday’s announcement as a statement of principles rather than the unveiling of precise legislation. But no president has overseen a comprehensive reform of the U.S. tax code since 1986 — and several have tried. Still, Trump has said he may seek to enact the biggest cuts to corporate and individual tax rates ever, with such pledges helping U.S. stocks rally ever higher on Tuesday. Trump’s efforts will no doubt be complicated by his plans to revive health care reform after a prior attempt fell victim to disagreements among Republican lawmakers last month. And the corporate tax cut pledge — which would see marginal tax rates for companies fall from 35 percent to as little as 15 percent — as well as other ideas advanced by the administration will have to contend with the complex realities of U.S. fiscal policy and a starkly divided Congress. Republican lawmakers are loath to increase deficits and passage of tax cuts frequently involves delicate compromises on the countless deductions offered by the tax code. Yet various estimates say dropping corporate taxes to 15 percent as favors doing could add north of US$2 trillion to the budget deficit over a decade. Republicans in Congress have proposed a somewhat higher rate of 20 percent.