White Home advisors impose minimal taxes on corporations fearing assaults on the 2017 GOP law

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White House advisors impose minimum taxes on companies fearing attacks on the 2017 GOP law

The idea, which is part of the preliminary talks and has not been officially endorsed, could attempt to defuse Democrats’ criticism that the GOP tax bill has allowed many large corporations to wipe out their federal corporate taxes altogether. The plan could also help generate revenue that could offset the effects of new middle-class tax cuts. Trump has promised to put in place a tax plan for the middle class ahead of the 2020 presidential election.

The 2017 Tax Act cut the corporate income tax rate from 35 percent to 21 percent, but allowed companies to continue to take advantage of loopholes and tax breaks to lower their taxes even further. The Tax Act also eliminated the corporate alternative minimum tax, which was intended to prevent corporations from over-using deductions to avoid paying taxes.

Democrats and critics said this tax cut is heavily targeted at the rich and corporate, and the component that benefits households will expire in a few years. Some presidential advisers fear a political backlash because some companies have reportedly paid little or no taxes since the law went into effect, an issue that has been picked up by some of Trump’s best rivals.

Both outside advisors to the President and White House officials have warned that the process is at a preliminary stage and that no decisions have been made on the shape of a new tax cut package. Many of them spoke on condition of anonymity because they were not authorized to discuss internal considerations.

“Trump was very clear: he really wants this to target people in the middle,” said one person involved in the effort. “You’re looking for ideas and looking at what we can do to offset some of these things.”

The proposal of a minimum tax on corporations could be interpreted by critics as an extraordinary admission by the White House that the 2017 tax cut went too far to cut business rates.

The potential tax plan also underscores the enormous political and political challenges that the White House will face in preparing a second tax cut proposal in good time before the 2020 elections, also because the White House appears to see the economic benefits that would come from 2017 overestimated is right.

Outside White House advisors have discussed creating a $ 1 trillion tax cut package aimed at the middle class by lowering tax rates and expanding tax-free savings accounts. They also talked about capping the amount of state and local tax payments that companies can deduct from their federal taxes, those involved in the talks said.

“The White House is considering numerous proposals that will benefit the middle class and American workers and promote long-term economic growth,” said White House spokesman Judd Deere.

Limiting state and local corporate tax breaks would repeat one of the bitterest battles of the 2017 tax cut, which limited how much federal taxes individual households could deduct from their state and local taxes. This provision, known as the “SALT” limit, has been attacked by Trump in an attempt to disproportionately raise money by taxing democratically governed states with higher state and local tax burdens such as California, New Jersey and New York.

“These are blue states that tend to have higher state corporate tax rates, so they would be the ones most affected by a corporate SALT cap,” said Ernie Tedeschi, a former Obama administration economist.

After the tax bill was passed, corporation tax payments were about 40 percent lower than planned prior to changes, according to the Brookings Institution, a Washington think tank. The White House said the tax cuts would spur investment in new businesses, but corporate investment fell sharply last year. The White House also forecast that the 2019 tax cuts would lead to economic growth of 3 percent, but instead of 2.3 percent.

The 2017 tax cut is expected to increase national debt by almost $ 2 trillion over a 10-year period, according to impartial estimates, and fuel criticism of Trump for wasting taxes as the annual deficit rises above $ 1 trillion.

Opponents of the tax law like presidential candidate Sen. Bernie Sanders (I-Vt.) Have attacked the GOP and billion dollar companies for allegedly paying $ 0 in federal taxes under the new law. Ninety-one Fortune 500 companies paid $ 0 in corporate taxes in 2018, more than double the amount in previous years, according to a left-wing political group, although experts suggest it is difficult to make accurate comparisons with previous years.

The average federal tax rate of the country’s 400 largest companies was around 11 percent in 2018, the lowest since at least 1984 and a sharp drop from the average tax rate of 21 percent paid between 2008 and 2015, according to the Institute for Taxes and Economic Policy.

Corporations have defended their low corporate tax burden, with some noting that they are either deferring tax payments to future years or using new deductions to encourage new business investment. Republicans and conservative tax experts also say that the corporate tax cut spurred economic growth and dramatically increased corporate investment in the economy. The economy grew by 2.9 percent in 2018, a three-year high.

“Americans are returning to the workforce and consumers have more money in their pockets. President Trump’s economic program leads to more jobs and higher wages for hardworking Americans, ”Treasury Secretary Steven Mnuchin said in a statement last year.

Larry Kudlow, the White House economic adviser who leads the tax effort, said the proposal is expected to be released in September, although officials have been promising a new tax cut plan since 2018 and are yet to provide specific details.

White House advisors have also added expanded tax-free savings accounts to the “2.0” package to increase the amount of money for low and middle income households. Kudlow told the New York Post earlier this month that the package may include “Universal Savings Accounts,” which would allow Americans to invest more tax-free, although the details are still vague.