The U.S. Senate released a tax plan on Thursday that, among other things, would postpone cutting the corporate tax rate until 2019.
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The decision to delay the onset of the corporate tax cut is a money-saving effort, potentially eliminating $100 billion in near-term costs. The dramatic business tax reduction is a centerpiece of the GOP’s tax plan, but it also happens to be one of the most expensive pieces.
Lawmakers have $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.
Senate Finance Committee aides said on Thursday that they expected the chamber’s bill to meet the budget allowance.
U.S. Treasury Secretary Steven Mnuchin said that while the administration would like to get the new 20% business rate implemented as soon as possible, a one-year delay would be preferable to a longer-term phase-in.
While some are concerned that postponing the cut in the corporate tax rate, a cornerstone of the Trump administration’s overhaul proposal, could prevent companies from making domestic investments next year, one tax expert told FOX Business that the timing of the rate reduction would ultimately have little impact on companies’ long-term plans.
“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.
Additionally, the Senate bill would allow for the immediate deduction of all capital investments, something Mnuchin said would be a “huge” incentive for companies to invest more money in the U.S. right away.
Aside from delaying the corporate tax cut, the Senate proposal would maintain seven tax brackets, though with different rates than the current law, repeal the alternative minimum tax (AMT) and eliminate all state and local tax (SALT) deductions.
It would also keep the estate tax, but double the deduction threshold.