Republican Congress leaders are pricked by reality constraints. President Donald J. Trump's presidential election promise of big tax cuts are all set to remain in the land of imagination. All US corporations will enjoy a little tax cut. The GOP leaders are yet to reach a consensus on financing their desired corporate tax cuts. They could not go beyond the vague plans to shut off the business linked loopholes.
Not much to hope
Not much dent will happen to the present 35 percent corporate tax rate. It could go low to a maximum of only 28 percent. If this is done, it will be nearly double the Trump proposed 15 percent rate. It will be much above 20 percent-the rate which Paul Ryan, the House Speaker, has suggested. The Trump led White House has pledged upon a definite plan within September. However, no details have emerged from the tax meetings held every week behind closed doors between Trump's advisers and congressional leaders. Tax professionals and analysts are now afraid of shallower cuts. This, if done, would derail Trump's aim of spurring economic growth and job creation. It will not do much to stop American companies from shifting tax liabilities and income offshore to the many lower tax countries.
According to David Rosenbloom of Caplin & Drysdale, rates proposed by both Ryan and Trump are simply daydreams. The international lawyer who once did a stint at the United States Treasury Department added that the two politicians have no idea about how to pull off a good economic outlook after such huge revenue cuts.
Both Trump and Ryan have showcased their plans for rate cuts as a method to push up economic growth and ratchet up hires. However, the biggest companies in the United States will find 28 percent tax rate cut meaningless as they have already paid lower rates than this figure from 2008 to 2015. As per a March 2017 dated report by Institute on Taxation and Economic Policy companies took fully legal advantage of the US tax code which permits aggressive tax avoidance and also tax subsidies. These breaks will become non-existent if Congress close the loopholes and goes for lower tax rate.
One thing is certain: revenue raising policies will in all certainty reach the final legislation stage, thus assisting to pay for the steeper cuts. To give an example, the controversial border adjustment plan proposed by Ryan and his other wish to end deductibility of the corporate interest payments will each collect a minimum of $1 trillion over a span of 10 years. The problem is that the plans are now stuck in political wrangling.