Trump pledges tax reform after healthcare failure

Trump pledges tax reform after healthcare failure
Following his failure to get his healthcare legislation through Congress on Friday, US President Donald Trump says he will focus on tax reform, the first major re-write of the US tax code in 30 years.

The draft healthcare bill, which would have scrapped the Affordable Care Act of his predecessor Barack Obama, was yanked because of a lack of support from Republicans, the party that controls both houses of Congress.

“I would say that we will probably start going very, very strongly for the big tax cuts and tax reform. That will be next,” Mr. Trump told reporters at the White House.

Mr. Trump, true to form, struck an optimistic note after the devastating blow to his agenda.

“Now we’re going to go for tax reform, which I’ve always liked,” he said.

Treasury secretary Steve Mnuchin said tax reform might be an easier sell.

“Health care is a very complicated issue,” Mr. Mnuchin said. “In a way, tax reform is a lot simpler.”

He did not reveal exactly what corporate tax rate the administration would propose, but said it will be “a lot lower” than the current 35 percent rate.

“The president’s objective is a middle income tax cut. … Our primary focus is a tax cut for the middle income (earners) and not the top,” Mnuchin told the news site Axios.

While stocks have gained massively since Trump’s election in November, Mr. Mnuchin forecast the market could move even higher with the administration implementing its economic program to cut taxes and eliminate burdensome regulations.

The problem for Mr Trump however is that the GOP health plan would have repealed spending enacted under Obama’s Affordable Care Act, ensuring that subsequent tax changes wouldn’t add to the budget deficit.

“Yes this does make tax reform more difficult,” House speaker Paul Ryan told reporters, “But it does not in any way make it impossible.”

“That just means the Obamacare taxes stay with Obamacare. We’re going to go fix the rest of the tax code.”

As analysts said, that explained why the Trump administration had focused first on health care before tackling taxes.

“Whatever the case may be, tax reform was always second on the agenda. What may have changed is that now they’ll go to tax reform next and not come back to this,” Joe LaVorgna, Deutsche Bank AG chief U.S economist told Bloomberg.

Tax reform will be complex and it remains to be seen if the GOP will be able to pass true tax reform or settle for tax cuts.

The Republicans want tax reform that lowers income tax rates for individuals and corporations, and makes up the lost revenue by reducing exemptions, deductions and credits.

But overhauling the tax code is difficult because some of the biggest tax breaks in the US are among the most popular.

These include the mortgage interest deduction, which reduced tax bills of 34 million American families by $65 billion in 2016,

And the 43 million families, who got a $70 billion tax break last year deducting their state and local income, sales and personal property taxes from their federal taxable income.

In other words, tax reform in the US could well turn into a political hot potato.

 



Business First is a peer-to-peer magazine: written by CEOs and other high level executives, with interviews with some of the country’s best leaders.


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