The initial response from business to Donald Trump’s ambitious tax plan has been overwhelmingly positive, with various trade groups and companies indicating it has the right ingredients to drive economic growth.
Some details of the plan, however, remain murky and advocates appear to be under no illusions about how difficult it will be to pass through Congress.
Business Roundtable, which represents CEOs from America’s biggest companies, said the move to cut the corporate tax rate to 15%, among other measures, reflected “key principles” to support the economy.
“In calling for competitive tax rates and moving toward a modern international tax system, the president’s proposal reflects the most important elements that must belong to any pro-growth reform,” EY CEO Mark Weinberger, who also is head of the peer group’s tax committee, said.
A number of CEOs, most notably AT&T’s Randall Stephenson, have indicated they would use extra balance sheet capacity generated by tax cuts to invest in jobs and R&D, helping to boost economic growth. Some opponents of Trump’s plan say companies might instead up executive salaries, dividends and share buybacks.
Trump’s administration appears to be arguing the big tax cuts will stimulate so much economic growth they’ll essentially fund themselves. Treasury Secretary Steve Mnuchin also indicated the administration was considering scrapping federal deductions on state and local taxes to help fund the plan.
It remains to be seen, however, whether Republican debt hawks will draw the same conclusions. If the cuts aren’t found to be revenue neutral, Trump would need the support of some Democrats in the Senate to make his changes permanent. Otherwise, they would expire in 10 years.
“We applaud the president’s focus on tax reform, but the plan includes far more detail on how the administration would cut taxes than on how they would pay for those cuts,” non-partisan group the Committee for a Responsible Budget said. It estimated the cuts would cost between $3 trillion and $7 trillion over the next decade, potentially weighing on economic growth.
Business Roundtable’s Weinberger stressed the importance of certainty. “We urge Congress and the administration to coalesce around a plan that embraces these principles, as they work toward enactment of permanent reforms,” he said.
The U.S. Chamber of Commerce, while welcoming Trump’s plans, also stressed a need for compromise. “To get this done, it will take leadership from the White House, hard work and compromise in the House and the Senate, and engagement from the private sector,” its president, Thomas J. Donohue, said.
The initial stock market reaction to yesterday’s White House announcement was muted, while Asian and European markets fells this morning, reflecting skepticism over how much of its agenda was realistic. Details that remain unclear include the rate at which companies will be taxed for repatriating foreign income. There also was no mention of the income thresholds that will apply to three simplified brackets for personal income tax of 10%, 25% and 35%.
To be sure, while U.S. stocks didn’t inflate yesterday, they’re still hovering near record highs amid broader confidence in the administration’s pro-growth agenda. “I’m a big proponent of tax reform,” Six Flags CEO John Duffey told Fox Business. “It would be fantastic for Six Flags.”