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Trump Administration Expected To Propose 15% Corporate Tax Rate

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Trump Administration Expected To Propose 15% Corporate Tax Rate
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A proposed 15 percent corporate tax rate widely expected to be rolled out Wednesday by the White House is a case of talk translating to action, according to RSM US LLP Chief Economist Joe Brusuelas.

A reduction of the corporate tax rate from 35 to 15 percent is the linchpin of President Donald Trump’s coming tax reform package, according to multiple newspaper reports.

RSM’s Brusuelas predicts the proposal will have “zero impact” on fixed-income markets.

“What it’s meant to do from the White House is to bolster [investor confidence], especially in equity markets, that there are tax cuts coming,” Brusuelas told Benzinga Tuesday. “There’s an imbalance right now in the economy between corporate and consumer expectations and hard data.”

If Trump doesn’t follow through on tax reform or cuts, investors should expect a “repricing of risk appetite” in the economy and financial markets, Brusuelas said.

Paying For Government With Growth, Lower Taxes

White House officials would not confirm the targeted tax cut number for the New York Times and said the number could change before the proposal is rolled out.

The cost of a 20 percent slash in the corporate rate is estimated at $2 trillion over 10 years, Brusuelas said — a figure that can be added directly to the national debt.

The challenge for the Trump administration, then, will be paying for the tax cut.

A combination of growth and reductions in government spending is needed, Brusuelas said — or “a complete change in tax regime,” such as proposals that have been made by Speaker of the House Paul Ryan and House Ways and Means Committee Chairman U.S. Rep. Kevin Brady.

Treasury Secretary Steven Mnuchin said Monday that the tax plan can be paid for with growth, according to the New York Times.

Ryan’s tax proposal includes a 20 percent tax on imports known as a border adjustment tariff. It’s unclear whether Trump’s proposal will include a border adjustment tariff, according to the Times.

While tax cuts might bring visions of former President Ronald Reagan to mind, Brusuelas said it’s an apples-to-oranges comparison.

“This is very different,” he said. “The 1986 comprehensive tax reform was about broadening the base and increasing revenues,” and included a corporate income tax hike, Brusuelas said.

Related Links:

Winners From A Border Adjustment Tax 

Why The Odds Of Tax Reform By 2018 Just Got Slightly Higher 

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Image Credit: By DonkeyHotey (Donald Trump- Caricature) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Posted-In: Donald TrumpNews Politics Legal Economics Exclusives Interview General Best of Benzinga

 

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