Trump wants to lower business rate to 15% in ‘biggest tax cut’ in U.S. history, Mnuchin says

President Trump wants to sharply reduce the tax rate for all businesses -- from multinational corporations to mom-and-pop shops -- to 15% in the “biggest tax cut” in U.S. history, Treasury Secretary Steven T. Mnuchin said Wednesday.

But the Trump administration has not embraced a House Republican proposal to include a controversial border adjustment tax, Mnuchin said during a forum sponsored by the Hill newspaper.

The White House is set to announce “principles” for its tax overhaul later Wednesday although officials stressed it would not be a formal bill ready to go to Capitol Hill or to be formally analyzed by congressional number-crunchers.

Trump proposed a 15% business tax rate during the campaign and will push for that as he and congressional leaders negotiate legislation, Mnuchin said.

The current U.S. corporate tax rate is 35%, the highest among developed economies. Many smaller businesses don’t pay the corporate rate but funnel their income through the individual tax code. The highest individual rate is 39.6%.

Trump’s campaign proposal called for reducing the seven individual tax brackets to four, with the highest rate dropping to 25%.

“We want to make business competitive and we want to simplify the personal tax system, lower taxes and create economic growth,” Mnuchin said.

“So this is going to be the biggest tax cut and the largest tax reform in the history of our country, and we are committed to seeing this through,” he said.

House Republicans have been working on a plan that would reduce the corporate tax rate to 20%. And the House plan would offset some of the lost revenue through a border adjustment tax that would bring in about $1 trillion over the next 10 years.

That tax would subject importers, including retailers, to higher taxes and produce breaks for companies that export. The proposal has split the business community.

Mnuchin said the administration likes some aspects of the border tax but is not backing it right now.

“We don’t think it works in its current form and we’re going to continue having discussions with them about revisions,” he said of negotiations with House leaders.

The non-partisan Tax Policy Center estimated that Trump’s campaign tax plan, which includes eliminating the alternative minimum tax and other changes, would reduce federal revenues by $7.2 trillion over the first decade.

Mnuchin brushed off concerns that the tax cuts would balloon the federal budget debt by saying the plan would fuel stronger economic growth and produce more tax revenue.

The tax cuts will boost annual economic growth to 3% and “that growth will pay for the plan,” Mnuchin said.

Republicans plan to use controversial dynamic scoring, which assumes the effects of economic growth, to determine the tax plan’s budget impact.

While cutting the corporate rate is straightforward, assuring that other businesses that file individual tax returns pay a 15% rate is much more complicated.

Those companies are known as pass-through businesses because their income passes through the individual tax code, Many are small, owner-operated firms. But pass-throughs also can be large partnerships, such as hedge funds, law firms and some of Trump’s own businesses.

Mnuchin said the tax plan would be structured so the 15% rate “won’t be a loophole for rich people who should be paying higher rates.” He provided no details.

Democrats and many budget analysts are skeptical that Trump can slash business taxes without causing budget deficits to soar.

“We definitely need tax reform as a way to grow the economy,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

But she said higher economic growth won’t offset the plan’s lost revenues and it needs to be paid for by reducing tax breaks or other measures.

“What I don’t want to see is that this tax reform is going to be paid for by magic,” she said.

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