Donald Trump to slash corporate tax to 15% in 'biggest cut in history', Treasury Secretary Steven Mnuchin reveals

The last significant corporate tax reform in the US dates back to 1986 and the current system is based on legislation from well before then

Josie Co
Business Editor
@JosieCox_London
Wednesday 26 April 2017 13:54
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Since before his January inauguration, Mr Trump has repeatedly promised a “phenomenal” tax plan
Since before his January inauguration, Mr Trump has repeatedly promised a “phenomenal” tax plan

US Treasury Secretary Steven Mnuchin has confirmed that President Donald Trump will seek to cut corporate tax to 15 per cent as part of a sweeping reform programme.

Speaking to CNBC on Wednesday, Mr Mnuchin said that Mr Trump will propose the "biggest tax cut" and "largest tax reform in US history".

Mr Mnuchin and White House chief economic advisor Gary Cohn, both former bankers at Goldman Sachs, are broadly expected to elaborate on the plan at a briefing later in the day.

Since before his January inauguration, Mr Trump has repeatedly promised a “phenomenal” tax plan, and earlier this week Republicans who slammed the growing national debt under Democrat Barack Obama said that they were open to the President's proposed changes, even though they could add trillions of dollars to the deficit over the next decade.

The last significant corporate tax reform in the US dates back to 1986 and the current system is based on legislation from well before then.

A report by professional services firm PwC published in January argued that the US business tax system in particular has become increasingly out of step and uncompetitive with the rest of the world. The report also showed that the US corporate tax rate is the highest among advanced economies.

"We want to move as fast as we can," Mr Mnuchin told CNBC on Wednesday.

"I think it's clear that the House, the Senate and the administration are all on the same page."

A major driver behind Mr Trump’s ambition for reform appears to be what is referred to as the “lock-out effect” which stems from high taxes discouraging US companies, like Apple, Google and Microsoft, from repatriating money that they generate abroad.

The US government’s non-partisan Joint Committee on Taxation has estimated that the amount of money generated outside of the US by American companies that has not been brought back home was around $2.6 trillion at the end of 2015, up from about $1.7 trillion in 2010.

Headline corporate tax in the US is currently at 35 per cent, while the average for the other OECD countries is currently around 24 per cent, according to PwC.

For individuals, the President has in the past proposed replacing the current system of seven tax brackets with a more streamlined system of three, where the rates are 12 per cent, 25 per cent and 33 per cent respectively.

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