(FILES) This file photo taken on April 28, 2016 shows US Speaker of the House Paul Ryan at the Capitol in Washington, DC. Donald Trump, the presumptive Republican presidential nominee, said May 6, 2016 he was surprised by the US House speaker's refusal to back his bid for the White House and that the two will meet next week.In a stunning declaration, Paul Ryan said May 5, 2016 he was not yet ready to support the billionaire, signaling a deep rift within the Republican party. / AFP PHOTO / NICHOLAS KAMMNICHOLAS KAMM/AFP/Getty Images
In 2012 Barack Obama tried to undercut Mitt Romney and campaigned on dropping the corporate tax rate to 28%. During the Republican Primary campaign Jeb Bush unveiled a corporate tax cut plan which provided the donors that fueled his $200 million dollar super pac something to look forward to. Jeb Bush advocated for reducing the corporate tax rate to 20%. Just days later Donald Trump unveiled his tax plan and pushed the bar even lower with his proposed rate of 18%.
Since election day Republican lawmakers have tried their best to cobble together legislation to deliver on the big tax cuts they have long promised. Various different tax schemes have been worked into various pieces of legislation, for example the ACHA would get rid of many of the upper income taxes that funded the Obamacare program. Many Republicans lauded this as a necessary first step towards passing the actual tax cut legislation they have coming down the pipe. Among that legislation is their corporate tax cut that is working itself through the House of Representatives.
There are various plans competing for support in the House, but the ones with the most support seeks to reduce corporate tax rates to 20 or 25 percent, a break from Donald Trump’s current proposed rate of 15 percent.
The logic behind the proposal is the same relied on by many corporate tax schemes, reduce the rate low enough that corporate earnings in offshore accounts never make it out of the country. With billions of dollars currently stashed in offshore accounts finding a way to reverse that trend is the subject of many a tax scheme, but others think reducing the corporate rate seems a foolhardy way to get such money flowing through the economy once again. As it stands now the general practice of offshoring is frowned upon, but many companies find the publicity blow such actions bring to be worth the increased cash flow.
There is some $2.6 trillion dollars in American corporate profits stashed overseas and getting it back into the United States is a key priority of the Trump administration, as it was the Obama administration before it. The Trump administration and particularly secretary of he treasury Steve Mnuchin view cutting corporate taxes as one of the key tools in their toolbox when it comes to accomplishing that goal.
Critics of such policies contend that since other countries and offshore accounts offer rates as low as zero percent, it seems hard to believe that any corporate tax scheme will entice them to pay increased taxes. Especially since many corporations are experiencing record profits and have obviously already made the political calculus to forgo taxes regardless of the public relations cost.
All of that said, it’s still not clear which version of the bill will find its way to President Trump’s desk.
As it stands now lawmakers plan to have the bill’s framework hammered out by the middle of next year. On top of that, after months of planning and numerous meetings trying to hash out the details, Republican leadership is still not sure which proposal to pursue. To complicate matters even more the party itself is heavily split as to how they want their proposed tax cuts to look. Business groups support a Border Adjustment Tax which would give corporations with heavy exports a more favorable position in the tax code. Conservatives of the Freedom Caucus are staunchly opposed to the BAT and have proved willing to sink Trump backed legislation to hold true to their conservative ideology.
To truly have anything in place by mid next year Republicans will need to sort through their ideological differences quickly while the president still retains the support of his base and some semblance of a mandate. While that should probably be a fairly simple task for a political party with firm control of the legislature and the presidency, the Republican Party has proved a difficult crowd to manage and even though there are months to go their window is slowly closing. The president is quickly losing support and this impacts each and every member of congress’s political calculations.
Midterms are right around the corner and even though Republican lawmakers hope to accomplish a lot, it’s not at all clear they will, much less that they’ll keep their jobs in the process.