GOP Divided on Corporate Tax Rates as Trump Proposes 20%

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Republicans, united behind Donald Trump as their nominee, are divided on the federal corporate tax rate if they gain control of Washington next year. Trump has proposed a 20% rate, but GOP opinions 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 heightened as the GOP’s chances of a strong showing in the upcoming elections improve, particularly after President Joe Biden’s recent debate performance. The corporate tax rate issue is expected to be a central 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 highlighted concerns about voter reaction to corporate tax cuts.

Divergent Views Within the GOP

Some Republicans, such as Rep. Chip Roy, are wary of appearing too 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 unified on this front, 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 November elections’ outcome will significantly influence the direction of corporate tax policy. A strong showing by Democrats could remove 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 up for debate, but both parties are eager 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 coincide with discussions on business tax provisions up 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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