Trump unveils plan to slash corporate tax rate to 15 per cent in ‘biggest tax cut’ in US history
Trump administration says plan will lower US corporate rate to one of the lowest in the world
US President Donald Trump announced on Wednesday he would press for a sharp cut in corporate taxes, a move that would slash the rate companies in the US pay the federal government to 15 per cent for revenues earned onshore and zero for most offshore income.
The tax reform proposal is part of efforts to boost US economic growth to at least 3 per cent, Treasury Secretary Steven Mnuchin told reporters in Washington DC, adding that the average corporate income tax rate of 35 per cent “is perhaps the most complicated and uncompetitive business rate in the world.” US gross domestic product grew 2.1 per cent year on year in the fourth quarter of 2016.
“Not a surprise the companies leave trillions of dollars offshore,” Mnuchin said.
To help offset revenue lost to tax cuts, Trump’s proposal will eliminate personal income tax deductions except for mortgage interest and charitable donations, a one-time tax on earnings that US companies have in offshore accounts, and an elimination of “tax breaks for special interests”.
“Many [tax economists] argue that the US’s top statutory corporate income tax rate of 35 per cent places firms at a competitive disadvantage against their foreign competitors,” said Sebastien Bradley, an associate professor of economics at Drexel University’s LeBow College of Business in Philadelphia.
“In that light, a reduction in the corporate tax rate to 15 per cent would mitigate many of the worst incentives of the current system (such as the incentives to locate real investment and reported profits in low-tax foreign jurisdictions) and help ‘level the playing field’ between US corporations and their competitors overseas.”