Control of the White House and both chambers of Congress are viewed by Republicans as a once in a generation chance to revamp the tax code. But much as they stumbled on the complexity of reaching consensus to repeal and replace Obamacare, they are sure to find tax reform presents another magnitude of disagreement and difficulty.
Setting aside for the moment that President Trump and House Speaker Ryan have different plans for revising the tax code for people, there is already a serious dispute raging within Republican circles over the corporate taxation.
At a nominal 35% of profits, the U.S. tax rate for corporations is the highest among the Group of 20 Nations. There has been a global competition by countries to attract corporations.
That has encouraged American corporations either to use accounting legerdemain to park trillions of dollars of profits offshore, or to take the more troubling step of moving to low-tax countries.
During the campaign, Trump spoke repeatedly of his intention to lower the corporate tax rate to 15%. As reality namely, the needs of financing the U.S. government set in, he began to speak of cutting the rate to 20%. Now, with the failure to eliminate Obamacare and its costs, the proposed rate spoken of is 28%. That, says Grover Norquist's Americans for Tax Reform, is apparently the lowest the corporate rate can go while by some unstated alchemy remaining revenue neutral. Revenue neutral makes the rate reduction eligible under Senate rules to be passed under "reconciliation", which needs only a 51% majority and nixes filibustering by Democrats who traditionally want to soak corporations irrespective of foreign competition.
But House Republicans, led by Paul Ryan, still have their sights on a 20% rate for corporations. To fill the crater left by what would be a 43% reduction…
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