U.S. Treasury Secretary Steven Mnuchin left open the possibility of delaying the administration’s planned 15 percentage point reduction in the U.S. corporate tax rate during a speech on Thursday, sending markets into the red.
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“The sooner we get this, the 20% rate, the better it is for the economy, but the House and Senate are having to look at how we pay for all of this,” he told FOX Business’ Maria Bartiromo during an interview at the Economic Club of New York. “These are things that are still being discussed … A year [delay] is better than, obviously, a longer phase-in.”
The dramatic reduction in the corporate tax rate is a centerpiece of the GOP’s tax plan, but it also happens to be one of the most expensive parts. Lawmakers have been weighing putting off the corporate tax cut until 2019, in order to balance costs with the $1.5 trillion allotted for tax reform under the fiscal year 2018 budget. This week, the Congressional Budget Office (CBO) estimated that the House proposal would add $1.7 trillion to the federal deficit over the next 10 years.
The Senate bill is expected to include a one-year delay in the corporate tax cut, sources told FOX Business on Thursday, which could save more than $100 billion. The Dow Jones Industrial Average was down nearly 210 points in midday trading.
However, even if businesses do have to wait a year to pay the lower tax rate, Mnuchin said the automatic expensing provision would take effect right away, providing firms with a “huge incentive to invest” domestically, even before the 20% tax rate is implemented.
A tax expert told FOX Business on Wednesday that the timing of the corporate tax cut will be less important over the long-term for companies.
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“Obviously the quicker it comes into effect, the more immediate the impact of it, but in terms of long-term planning for the location of businesses, phasing in would work just as well as an immediate cut,” Stephen Hamilton, law partner at Drinker Biddle, said.
One thing Mnuchin was steadfast on was the 20% rate. While acknowledging that President Donald Trump originally wanted to lower the corporate tax rate to 15%, he said ultimately the higher rate was decided on because it “was the right balance of what [the U.S.] could afford.”
“We’re sticking with the 20%, that’s critical,” he said.
The Treasury secretary said he expects lawmakers can have a finished bill on the president’s desk by December.