A possible fix for the Senate GOP tax bill could lead to a fight with Trump over his ‘red line’ on tax cuts

President Donald Trump

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President Donald Trump
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  • Treasury Secretary Steven Mnuchin said Monday President Donald Trump would not bend on his desire for a 20% corporate tax rate.
  • GOP Sen. Susan Collins said Monday, however, that a corporate rate above 20% is on the table.
  • Analysts say that a slightly more modest cut would help the tax bill pass, but it would also anger the president.

On Monday, Treasury Secretary Steven Mnuchin said President Donald Trump has determined one piece of the GOP tax bill is non-negotiable: the 20% corporate tax rate.

“It’s not going up,” Mnuchin said at The Wall Street Journal CEO Council. “I can tell you this is one of the things the president feels very strongly about.”

That line in the sand flies in the face of what some influential Republican lawmakers have suggested. GOP Sen. Susan Collins on Monday suggested that the Senate Republican tax bill – the Tax Cuts and Jobs Act (TCJA) – could still cut the corporate tax rate to a level above 20%.

Collins told reporters that she is fighting to have the corporate tax rate set at 21%, a small but significant change that could generate a sizeable amount of revenue for the tax plan. A proposed increase in the corporate rate would allow for a more generous child tax credit or a more modest change to the state and local tax deduction.

“There’s a lot that we could do with that funding,” Collins said.

A more modest cut for the corporate rate could also help the bill meet procedural rules in the Senate, according to Isaac Boltansky, an analyst at the research firm Compass Point. Additionally, it could give Republicans more wiggle room to satisfy some of demands from recalcitrant GOP lawmakers.

“Nearly everything is negotiable at this stage in the process, especially given the need to satisfy procedural hurdles in the Senate, which is likely to lead to the corporate rate target inching upward and a slew of sunsets,” Boltansky wrote Tuesday. “Despite ‘red line’ commentary, we believe the conversation is beginning to shift toward a slightly higher corporate rate of somewhere between 21% and 23%.”

While the change could help the bill in the Senate, a higher proposed corporate rate than the 20% would not go over well with the president.

Trump had long promised a 15% corporate rate, something on which he has already budged. And the Senate bill already includes a one-year proposed delay in the implementation of the corporate tax cut.

Prior to Monday, Mnuchin said the 20% the corporate rate is the “number one issue that is not negotiable.” When asked if the 20% number is his “red line” after the release of the GOP’s unified tax framework, Trump said, “Twenty is my number, so I’m not negotiating that number.”