WASHINGTON — Trump proposed slashing the U.S. tax rate on corporate and pass-through business profits to 15 percent from 35 percent or more, while also offering tax cuts to average Americans in a rough outline of his tax policy goals.
A one-page summary of his proposals, released at a White House briefing, said Trump also wants to reduce the number of tax brackets to three from seven, double the standard deduction that Americans can claim on their tax returns and repeal the estate tax and alternative minimum tax.
Under U.S. law, only Congress can make major tax law changes. Lawmakers initially greeted Trump's plan as a starting point for further discussion on overhauling the tax code.
Although Republicans control the House of Representatives and Senate, some parts of the plan may be a hard sell, especially to Republican fiscal hawks. It is not expected by analysts to include any proposals for raising new revenue, potentially adding billions of dollars to the federal deficit.
Mnuchin, who is spearheading the administration's effort to craft a package that can pass Congress, described the plan as the "the biggest tax cut" in U.S. history and said he hoped it would attract broad support.
"There's multiple ways of doing this and the president is determined that we will have tax reform," he said at a breakfast forum in Washington sponsored by The Hill news outlet.
Republican House Speaker Paul Ryan, a longtime champion of a major tax restructuring, expressed optimism about the plan, even though Trump's proposals are not expected to include a "border adjustment" tax on imports. That controversial idea was in earlier initiatives floated by House Republicans as a way to offset revenue losses resulting from steep tax cuts.
"We've seen a sneak preview. We like it a lot," Ryan told a gathering of lobbyists and lawyers. "It puts us on the same page. We're in agreement on 80 percent and on the (remaining) 20 percent we're in the same ballpark."
Republican lawmakers generally greeted Trump's plan as a single viewpoint that will start negotiations in Congress and will ultimately be modified if it becomes law.
"I welcome the White House's initiative on this, it's a good thing, and I think over time we can get to a good place," Republican Representative Peter Roskam, a member of the tax-writing Ways and Means Committee, told lobbyists. "It could elude us if we're not careful."
U.S. stocks were little changed on Wednesday amid a flood of U.S. corporate earnings. Some analysts said investors were aware of the long road ahead before a bill is passed.
"We have a pretty good idea that he (Trump) is targeting lower corporate taxes, lower individual taxes and a simplification of the process, but all that is in an ideal world," said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey. "The market will not interpret the plan negatively, but there are obstacles in that course, just like with anything that Trump says and does."
Trump's plan would cut the income tax rate paid by public corporations to 15 percent from 35 percent and reduce the top tax rate by pass-through businesses, including many small partnerships and sole proprietorships, to 15 percent from 39.6 percent, Mnuchin said.
However, he added that rich individuals would not be able to use the lower business rate as a loophole.
Mnuchin said the effort to overhaul taxes would be conducted with Congress, adding, "It was very important to the president that we put out the core principles. This is part of his big impact for the first 100 days."
Trump will propose a repatriation tax on offshore earnings along the lines of his campaign proposal for a 10 percent levy, versus the current 35 percent, a White House official said on Tuesday on condition of anonymity.
He will also call for an increase in the standard deduction people can claim on their tax returns, an administration official confirmed on Wednesday.
On the border adjustment tax, Mnuchin said, "We don't think it works in its current form, and we're going to continue to have discussions with them (congressional leaders) about revisions that they will consider."
The tax proposal may well need the support of Democrats.
If it is deemed to increase the national deficit beyond a 10-year window that is covered by the budget, then it would need 60 senators to support the changes. Because there are only 52 Republicans in the Senate, Trump would need to win over at least eight Democrats to meet the meet the higher bar.
But Republicans have suggested they could skirt the 60-vote requirement by using expiration dates and dynamic scoring – a process that projects deficits also arguing that tax cuts will grow the economy.
Whether Trump will include provisions that could attract Democratic votes, such as a proposal to fund infrastructure spending or a child-care tax credit as proposed by his daughter Ivanka, is still the subject of speculation.
The last overhaul of the U.S. tax code was in 1986 during the administration of former President Ronald Reagan, a Republican.
(Additional reporting by Steve Holland, David Lawder and Doina Chiacu; Writing by Doina Chiacu and Frances Kerry; Editing by Simon Cameron-Moore and Paul Simao)