Tax reform phase two may include lowering the corporate tax rate, according to President Donald Trump. Republicans are “thinking about bringing the 21 percent [corporate tax rate] down to 20,” Trump said in a televised interview aired on July 1. “Then, for the most part, the rest of it would go right to the middle class,” he added.
Corporate Tax Cuts
The corporate tax rate was lowered from 35 to 21 percent last December under the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97). Originally, the White House and many congressional Republicans called for an even lower corporate tax rate.
Trump originally proposed a 15 percent corporate tax rate, and earlier drafts of the GOP tax reform bill proposed 20 percent. However, under the reconciliation process, Senate budget rules limited how much Republicans could cut the corporate tax rate.
Individual Tax Cuts
The next round of tax reform will focus on making permanent the individual tax cuts enacted under the TCJA temporarily through 2025. House Ways and Means Committee Chairman Kevin Brady, R-Tex., has said that extending the tax cuts will be the “centerpiece” of a phase two bill.
Phase Two Timeline
House Republicans are expected to see a legislative outline of the phase two bill in July. “I expect to see the legislative outline released [publicly] in early August, with votes in the fall…,” Brady has said.
Likewise, Trump predicted in the July 1 televised interview that the tax reform phase two measure would be taken up in October, or “maybe a little sooner than that.” Brady has said that a phase two package with two or more bills is expected.
At this time, another major tax bill clearing the Senate this year is considered unlikely on Capitol Hill. The reconciliation process allowed the TCJA to be approved last year with a simple GOP majority, receiving zero Democratic votes. However, Brady has said that specific legislative path is not an option this time around.
Under regular order, legislation must meet a 60-vote threshold in the Senate. Currently, the phase two measure would need at least nine Democratic votes to clear the chamber.
Democrats have remained largely united in their opposition toward the TCJA. However, many Republicans remain hopeful that a vote on making permanent individual tax cuts, just prior to midterm elections in November, may garner enough Democratic support.
By Jessica Jeane, Wolters Kluwer News Staff