Republican Discord Over Corporate Tax Rate Amid Trump’s 20% Proposal

Republicans, rallying behind Donald Trump as their presidential nominee, are divided on the federal corporate tax rate if they gain control of the government next year. Trump has proposed a 20% rate, but opinions within the GOP vary, with some advocating for a rate as low as 15% and others open to an increase up to 25%.

Intra-Party Tax Debate Intensifies

The urgency of this debate has increased as the GOP’s chances of a strong showing in the upcoming elections improve, especially following President Joe Biden’s recent debate performance. The corporate tax rate issue is set to be a key topic at the GOP convention later this month.

“Ultimately, you want the rate as low as possible,” said Richard Stern from the Heritage Foundation. “The economic benefits of a cut outweigh the potential effects on America’s exploding debt.” However, Stern also expressed concerns about voter reaction to corporate tax cuts.

Divergent Views Within the GOP

Some Republicans, such as Rep. Chip Roy, are cautious about appearing too closely aligned with corporate interests. “There’s a bubbling-up concern that we should not be doing the bidding of corporate America,” Roy told Politico, indicating his openness to a corporate rate increase to fund other priorities. Similarly, Rep. Jason Smith, chair of the House Ways and Means Committee, suggested that some Republicans might find common ground with Democrats on this issue.

Democrats, led by Biden, are more united on this issue, with plans to raise the federal rate to 28% if re-elected. They argue that higher corporate taxes are necessary to reduce budget deficits and ensure big businesses pay their “fair share.”

Impact of Election Results

The outcome of the November elections will significantly shape the direction of corporate tax policy. A strong showing by Democrats could eliminate corporate tax cuts from the agenda, while a Republican sweep might not immediately resolve the internal debate.

The 2017 tax law, which permanently lowered the corporate rate to 21%, is not currently under discussion, but both parties are keen to revisit it. If Republicans perform well in the elections, they may use reconciliation to pass tax reforms without Democratic support.

Business Community’s Stance

The business community is also engaged in the debate. The Business Roundtable, representing top business executives, plans to spend over $10 million advocating for tax reforms to maintain global competitiveness. Procter & Gamble (NYSE:PG) CEO Jon Moeller, who leads tax issues for the group, warned, “Any increase to that rate would immediately place the US rate near the top of nearly all corporate rates amongst other major economies.”

Future Tax Provisions

The debate over corporate taxes will occur alongside discussions on business tax provisions scheduled for renewal in 2025. These include incentives for research and development and interest payments, many of which have already expired. New credits are expected to be part of next year’s tax talks.

Richard Stern from the Heritage Foundation highlighted broader GOP concerns about corporate America’s embrace of social causes, suggesting that the tax code could be used to enforce a focus on shareholder interests over environmental, social, and governance issues.

 

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