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Abu Dhabi, UAEMonday 25 June 2018

Trump suggests openness to negotiations on GOP tax plan

Corporation tax may be cut to 22% rather than 20% specified in bill that passed on Saturday

US President Donald Trump has signaled corporation tax rates may be cut to 22 per cent rather than the 20 per cent previously specified. Mandel Ngan / AFP
US President Donald Trump has signaled corporation tax rates may be cut to 22 per cent rather than the 20 per cent previously specified. Mandel Ngan / AFP

President Donald Trump suggested Saturday he may be willing to negotiate changes to a significant portion of the tax overhaul, the corporate tax rate, injecting an element of uncertainty into the tax plan only hours after it cleared the Senate.

Trump told reporters at the White House before a trip to New York City that he would consider setting the corporate tax rate at 22 per cent, compared to a 20 per cent rate that he has pushed for with House and Senate Republicans during the fall.

Pointing to expected talks between House and Senate negotiators this month, Trump predicted "something beautiful is going to come out of that mixer" and the business tax would come "all the way down from 35 to 20. It could be 22 when it comes out, but it could also be 20. We'll see what ultimately comes out."

Trump spoke after the Senate approved a US$1.5 trillion tax bill early Saturday that would rewrite the nation's tax code, cut individual rates and slash the corporate tax rate from 35 per cent to 20 per cent beginning in 2019. If enacted, the bill would provide the most sweeping changes to the tax system in three decades and help Trump deliver the first major legislative win of his presidency.

Trump's suggestion of a higher corporate tax rate than what has been included in legislation approved by the House and Senate represented an about-face after the president and administration officials maintained a hard line that a corporate rate higher than 20 per cent was a non-starter.

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Vice President Mike Pence said in a speech to the Tax Foundation in mid-November that the administration would "cut the corporate tax rate from one of the highest in the developed world down to 20 per cent — and not a penny more."

Treasury Secretary Steven Mnuchin, who accompanied Trump to New York for fund-raisers on Saturday, said in September that the 20 per cent corporate rate was "not negotiable."

The shift perplexed some Republicans. Senator Marco Rubio tried to pare back the proposed cut in corporate tax rates to 20.94 per cent to provide a more generous increase in the child tax credit. But he was rebuffed.

"Senate leaders & White House fought hard to defeat expanded #ChildTaxCredit b/c of 20.94% rate but now 22% is OK?" Rubio tweeted Saturday.

White House officials did not immediately respond to questions seeking clarity on Trump's views of the proposed corporate tax rate.

Senate and House Republicans now head into a new phase of seeking to reconcile differences in the legislation passed by both chambers, a behind-closed-doors process that could move quickly. Trump has said he wants to sign the tax package into law before Christmas.

Republicans have pointed to the tax bill as crucial to retaining its House and Senate majorities in next year's midterm elections. Democrats have said the bill will solely help the wealthy and corporations at the expense of more modest-earning workers.

Democrats have noted that while the corporate tax rates would be permanently reduced under the plan, it would only offer temporary tax cuts to individuals, lasting until 2026.