The Trump administration has proposed slashing the rate of corporation tax in the US, with the aim of spurring economic growth, the Treasury Secretary said.
US President Donald Trump Photo: AFP
Steven Mnuchin unveiled President Trump's tax blueprint, which reduces the business tax rate from 35 percent to 15 percent.
Economists say the tax cuts will add trillions of dollars to the deficit over the next decade.
But Mr Mnuchin said the tax plan will pay for itself "through growth, through deductions and closing loopholes".
Secretary Mnuchin, joined White House chief economic adviser Gary Cohn on Wednesday to announce the tax proposal, which he called "the biggest tax cut" in history, but it is unclear whether that will really prove to be the case.
The Republican president's plan will act as a guide for Congress as they try to pass a tax reform bill in the months ahead.
It could face resistance from fiscal hawks within his own party.
Democrats are highlighting the fact that Mr Trump's own tax liability from his businesses would shrink under his blueprint, saving him millions.
Also mentioned in the broad outline:
- Some sort of repatriation tax, giving big companies an incentive to bring back money they hold overseas
- Tax breaks for childcare expenses
- Double the amount of standard tax deduction
- A cut in individual rates, although few details expected yet
- More tax rate cuts for hedge funds, and other enterprises that pay taxes at individual rates
- Easing the tax form process
Mr Trump's blueprint is not expected to include any proposals for raising new revenue.
The much-discussed border tax that would put a tariff on imports - favoured by House Speaker Paul Ryan - will not be in the plan.
And nor will Mr Trump's $1 trillion-infrastructure improvement plan feature.
The White House is also working to include an expanded child and development care credit, for which Mr Trump's daughter, Ivanka, has advocated.
Democrats are not expected to back a plan which adds to the national debt.
That means Republicans, who control the House and the Senate, may be forced to work under a budget procedure which allows them to proceed without them.
President Trump would like to see Congress pass tax reform by the middle of autumn, says the White House.
Republican lawmaker Kevin Brady, who heads the House Ways and Means Committee and co-chairs Congress' tax-writing panels, praised the broad tax outline.
"I think the bolder the better in tax reform," he said. "I'm excited that the president is going for a very ambitious plan."
Senator Orrin Hatch, a Utah Republican, questioned whether lowering tax rates for small businesses, known as S corporations or "pass through" businesses, was beneficial.
Though "pass through" entities are typically small businesses, parts of Mr Trump's own real estate conglomerate also qualify, giving Democrat's more ammunition in opposing the plan.
Democrats have also criticised Mr Mnuchin's claim that economic growth would create enough new tax revenue to cover the corporate tax cuts.
Democratic Senator Sherrod Brown called the 15 percent rate workable only "if you want to blow a hole in the federal budget and cut a whole lot of things like Meals on Wheels and Lake Erie restoration and then lie about the growth rate of the economy".
Geof Nightingale, the tax and private business leader at PWC, told Morning Report today the proposals may prompt a new wave of tax cuts around the world, including New Zealand.
"It will encourage other countries to think about their corporate tax rate, and that was indeed the experience after the last corporate tax cuts in the States, 20 or 30 years ago."
But Mr Nightingale warned the US tax proposals also included the possibility of a tax on exports to America, which could hurt New Zealand firms.
- BBC / RNZ