Two top Trump administration officials said it may not be possible for President Donald Trump to deliver on his promise to cut corporate tax rates to 15 percent.
In separate appearances Tuesday, Treasury Secretary Steven Mnuchin and Marc Short, Trump’s legislative affairs director, both said Trump is still committed to that rate cut -- down from the current 35 percent -- but acknowledged the potential for compromise.
“The president has made it clear since the campaign, ideally he’d like to get it down to 15 percent. I don’t know if we’ll be able to achieve that given the budget issues, but we’re going to get this down to a very competitive level,” Mnuchin said Tuesday at the CNBC Institutional Investor Delivering Alpha Conference in New York. “What the exact number is is less important, what’s important is making sure we have a competitive system.”
“Ultimately there’s probably compromise to get to the best deal,” Short told reporters at an event sponsored by the Christian Science Monitor. He also said that Trump continues to believe that a 15 percent corporate rate would best stimulate the economy, while convincing American businesses to keep their tax addresses in the U.S.
Steve Schwarzman, the chief executive officer of Blackstone Group LP, a private equity firm, said later at the CNBC event that he’s optimistic the corporate rate will wind up “somewhere between 25 and 28 percent.”
“I think there’s certainly consensus to do that,” Schwarzman said.
Trump wants the lower corporate tax rate to also apply to certain pass-through businesses, such as S corporations and partnerships, which don’t pay taxes themselves, but pass their earnings through to their owners, who pay taxes at their individual rates, Mnuchin said. However, he said “service companies that are pass-throughs will not get the benefit of the rate.”
Pass-Through Difference
“If you earn money that’s clearly income, if you’re an accountant firm and that’s clearly income, you’ll be taxed at income rates -- you won’t be taxed at pass-through rates,” Mnuchin said. “If you’re a business that’s creating manufacturing jobs you’re going to get the benefit of that rate because that’s going to be passed through to help create jobs and better wages.”
Mnuchin also repeated that Trump is committed to eliminating the special tax treatment of carried interest -- but not for all the investment firms that make use of it. “The president’s been very clear that hedge funds will not have the benefit of carried interest,” he said. But other firms -- “entities that do create jobs,” Mnuchin said -- may still qualify.