Trump To Order Corporate Tax Rate Cut To 15%, Loading Up To $2 Trillion In Extra Debt

Tyler Durden's picture

Ahead of Trump's much anticipated tax announcement on Wednesday, the WSJ reports that the president has ordered his (mostly ex-Goldman) White House aides to accelerate efforts to create a tax plan "slashing the corporate rate to 15% and prioritizing cuts in tax rates over an attempt to not increase the deficit" which means that without an offsetting source of revenue, Trump is about to unleash the debt spigots, a proposal which will face fierce pushback from conservatives as it is nothing more than a continuation of the status quo under the Obama administration, and may well be DOA.

The WSJ adds that during an Oval Office meeting last week, "Trump told staff he wants a massive tax cut to sell to the American people" and that it was "less important to him if the plan loses revenue."

Hoping to add a sense of dramatic urgency - after all his 100 day deadline hits on Saturday - Trump told his team to “get it done,” in time to release a plan by Wednesday.

Translation: Trump's massive tax cut will be funded by debt, and as a result, will be at best temporary as it will be in breach of the revenue constraints in the reconciliation process; at worst it will never happen as it will now require Democrat votes.

Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn are scheduled to meet Tuesday to discuss Mr. Trump’s tax proposals with Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan, Senate Finance Chairman Orrin Hatch and House Ways and Means Chairman Kevin Brady of Texas. The meeting comes in advance of a Wednesday announcement by Mr. Trump about his principles for tax policy.

While Trump promised to cut corporate rates to 15% from 35%, with the BAT now out of the picture, there aren’t enough business tax breaks that could be repealed to offset the fiscal cost, meaning such a move would increase budget deficits, the WSJ notes. Roughly, each percentage-point cut in the tax rate lowers federal revenue by $100 billion over a decade, so a 20-point cut would cost the government $2 trillion, according to the congressional Joint Committee on Taxation.

And, as we noted above, the fact that Trump has flip-flopped on revenue offsets may have also doomed Trump's tax plan: as the WSJ points out:

"any plan that adds to budget deficits would be difficult to advance on Capitol Hill, for both procedural and partisan reasons. The president’s fellow Republicans, who control both the House and Senate, are aiming to pass a tax bill through a process known as reconciliation, which means they wouldn’t need votes from Democrats. However, bills passed under reconciliation can’t increase deficits beyond the typical 10-year time frame against which tax and spending policies are projected."

Meanwhile, The House Republican tax proposal calls for a 20% corporate tax rate, with the cost covered by including a border-adjustment feature that taxes imports and exempts exports. Trump’s White House has sent mixed messages about whether it would support the border-adjustment plan.

Asked Monday if the president’s tax plan would be revenue-neutral, meaning it wouldn’t add to the debt, Mr. Mnuchin told reporters that it would “pay for itself with economic growth.” By that he meant that the administration expects to be able to project faster growth due to tax cuts, which would in turn increase revenue and avert the risk of bigger budget deficits. Many economists doubt whether economic growth can ramp up on a sustained basis without a big pickup in productivity and labor-force growth, and it is uncertain the tax-policy changes would do that.

 

“They will lose a boatload of revenue that we can’t afford to lose and far more than this team will offset by closing loopholes,” said Jared Bernstein, who was an economic adviser to former Vice President Joe Biden. Cutting marginal tax rates for businesses could generate some economic growth, he said, but not nearly enough to pay for itself with increased revenue.

 

“These promises about all kinds of growth and investment that are going to be triggered by these tax cuts never appear, and the empirical historical record is clear on that,” Mr. Bernstein said.

In other words, that makes it "difficult if not impossible for Republicans to pass a deficit-financed tax cut that doesn’t expire without getting Democratic votes in the Senate. Democrats are against large tax cuts for corporations, especially at a time when Mr. Trump is proposing cuts to government spending programs they prioritize, like housing, arts and the environment."

It also means that as Compass Point's Isaac Boltansky wrote earlier today, Trump's release of tax details on Wednesday will likely deliver only "a vague generalization" of his goals in coming tax reform effort; and, if the WSJ is correct in laying out Trump's uber-ambitious plan, the generalizations will also be impossible to be implemented, effectively killing most if not all hope of tax reform for the foreseeable future as the bickering between Democrats and Republicans will be effectively insurmountable.

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BullyBearish's picture

There has been NO presidential tax plan put into law since 1974, but since shrump is soooo popular with congress, i'm sure he'll chalk up a really beautiful win on this one...

NugginFuts's picture

Is this what we voted for? Really?

NoDebt's picture

I bet if there was a war they wouldn't have any problem scrounging up the money for that.

 

NoDebt's picture

Hey, where's Paul Krugman to support Trump by reminding all of us that debts and deficits don't matter?

 

Ghost of Porky's picture

He's busy stroking his cat.

auricle's picture

Helicopter money via debt monetization of taxes. Who could have seen that coming. 

Yukon Cornholius's picture

That oughta keep those 8000+ retail stores from closing.

Too late for American apparel though. I loved their v-necks.

FrozenGoodz's picture

Sooo tax reform is DOA ... what's next there's gotta be something easy out there we can get a win on ... make May National Women Wear Heels to Work month? 

NoDecaf's picture

Maybe the fastest way to a reset is exactly this. Just spend into oblivion.

 

Maybe we should be cheering these fuckers on...

 

free shit for everyone.

 

spend spend spend

macki mack's picture

"Mr. Mnuchin told reporters that it would "pay for itself with economic growth' "

Translation:

"Mr. Mnuching told reporters that it would 'immensely benefit my co-religionsts'"

http://biblicisminstitute.wordpress.com/2015/07/28/how-the-ashkenazi-jew...

stizazz's picture

The wealthy Trump looks out for his wealthy buddies.

Schlump's picture

I help the Little Guy, that's why I was elected. I'm the billionaire who cares about little people.

I also help Trump Organization by legislating a 15% tax rate .... with no offsets.

"The beauty of me is that I’m very rich .... The point is, you can never be too greedy." (actual Trump quotes)

Giant Meteor's picture

One nation, by the swamp, for the swamp, so help me swamp ..

fbazzrea's picture

i got this one... thanks for not beating me up over the germans. i still suffer from lapses in and out of idiocy. (;

Giant Meteor's picture

Great to hear from you!

As far as the rest, trust me,  lol , as far as uumm, the lapses , yeah, let me count the ways!

No worries at all, I enjoy reading your commentary on these, the day's of our lives ;)

Take this note, I'll being lucky to get out of it with minimum 3 edits, eyesight, old machine, fat fingers ..

It's a bitch and ole meteor is feeling, well old some days ..

But God damn, we're still here !

hxc's picture

This may be the plan. Maybe Trump read some Konkin and said "Fuck it, smash the state." Undercover neocon, or undercover agorist?

johngaltfla's picture

This is actually simpler than you think. If no tax reform or cuts are passed along with no Obamacare repeal/reform, this market is going down in September or October like it's 1929.

Or 1907.

Or worse.

Giant Meteor's picture

Meh, let's just split the difference !

O ye'll tak' the high road, and I'll tak' the low road,
And I'll be in Scottland a'fore ye,
But me and my true love will never meet again,
On the bonnie, bonnie banks o' Loch Lomond.

waterwitch's picture

It worked in Venezuela!

The Ram's picture

If it is going to end, then yes, free shit for everyone.  Let the Asian countries work 16 hour days, so we can have lots of free shit here.  No need to work. Helicopter money for all.  

a Smudge by any other name's picture

Isn't this the old "but this will cost government money" line?

Governments don't make money, they aren't businesses, they product nothing of value.

Jack's Raging Bile Duct's picture

That's why I wanted Hillary to win. Too many people, rich and poor, depenandant on The Leviathan. There will be not likely be any revolution. TBTB know which buttons will trigger that; therefore, they shall not. Only collapse will deliver us from this shit.

monkeyshine's picture

With a budget over $4 Trillion per year, this amounts to less than 5%.

Sudden Debt's picture

It will just add to the deficit.

We're at 1 trillion now, and with the wars he's starting and all the other crap, he'll push the deficit to 2 trillion.

That's a 10% debt increase per year IN SO CALLED GOOD YEARS!

What when the market crashes and the banks need saving yet again???

In 4 years from now, the deficit will be over 30 trillion!

America is now officially a basketcase. It's over. No more turning back.

Giant Meteor's picture

Yep, it's baked in ... Stick thy fork in it ...

Well, the good news is, at least everything else is contained !

MAAAHM's picture

Right after that can be June, fix your fractured feet month sponsored by the men that wanted to see it back in May

Scuba Steve's picture

"May National Women Wear Heels to Work month" - good luck with that one

 

might have a better chance:

May Dikes on Trikes to Work month

Or:

Help a Beaver, Eat a Beaver at Work month

gatorengineer's picture

In all seriousness where the hell do you think the middle class white collar jobs went?  When the corporate centers moved to europe to dodge americas high tax rate, the white collar jobs went with them.  This IS an important first step.  Let the flames begin..

lucyvp's picture

I'm a wait and see kind of girl.

Corporations don't pay 35%, unless they are small and don't have an army of accountants and lawyers.

What is the average tax rate paid by U.S. corps?  I have no problem with 15% if all the "loop holes" were closed.  

I am skpetical.  Will the tax rate be lowered and no changes in the law regarding how the tax is applied?

I work next to the corporate tax group for a major corporation.  Everytime I hear them talk, I shake my head. So much precious brain power going to comply with the tax code.

======

Same goes for the personal income tax.   I spend hours doing it.   Always afraid that I forgot something.  Either income I forgot, or a deducation.  Either way I'm screwed.

bigkahuna's picture

I agree with you. I think business will benefit with small business able to raise their compeitiveness. Return to scale should allow for a higher frequency of tax receipts too - it may be "revenue positive" ---we'll see...

eclectic syncretist's picture

Ryan is going to cock-block any proposal that comes from Trump, because he doesn't give a shit about the American people. In time's past reducing taxes for big business was what the GOP was all about, with their trickle down scam strategy to enrich the few. But this is different, because now it's Trump.

Ryan is a sack of shit unworthy of any leadership position whatsoever. And Trump should be pushing middle class tax cuts, regardless of the prospects. Get big government out!

wildbad's picture

flat tax 15%
end the fed
and the real fed agencies too

Big Twinkie's picture

Why not 0% tax? It's funny money anyway, just print more of it.  We already have inflation.  What could be more fair?

Donald Trump's picture
Donald Trump (not verified) eclectic syncretist Apr 24, 2017 3:38 PM

Well, do you see any middle class people in his advisory team?

Stop dreaming and empty your pocket, pleb !!!

Creepy_Azz_Crackaah's picture

WTF? Did DailyTardboy go completely under? There's no spam plastered all over your post.

MAAAHM's picture

I see us. We are on welfare because we figured out it was easier than our upcoming tax rate and inflation adjustments. I wonder how fast we can break the system that way..

fbazzrea's picture

i'm working on their supply side. (;

 

Nexus789's picture

Plus another trillion debt for his proposed infrastructure plan. 

Blue Balls's picture

So many people misunderstand tax cuts.  Since the Federal Reserve can print at will taxes have been a way to remove money from the masses and allow the federal government to overspend while controlling inflation.

Trump by cutting corporate taxes is putting more resources into the hands of corporations or producers in the hope that they will produce more creating MORE tax revenue.

If he can reduce federal government consumption and move resources into the private sector more will be produced meaning more taxes collected.

I agree with Trump on this one. 

breaktwister's picture

Just like how they have used cheap credit to expand or increase production? Sarc. Moar share buybacks, dividends and bonuses for the top brass.

new game's picture

keep throwing it at the wall(what wall-lol), and sooner or latter sumtin gonna stick...

HooRAY4rSIDE's picture

Fine print is that the JOO OWNED companies will get a double on that tax cut thanks to his wise-en-heimer son in law...

 

The 'carriage' which used to be the United States of America turned into an irredeemable kosher pumpkin

Reichstag Fire Dept.'s picture

NoDebt, haven't you heard?

Taxation is theft.