GOP wrestles with keeping prized 20 percent corporate rate

Republicans would face an uphill battle if they decide to increase the corporate tax rate from 20 percent in their tax-reform legislation.

Reducing the corporate rate from 35 percent to 20 percent is seen as a crowning achievement and the bill’s centerpiece.

GOP lawmakers also think a 20 percent rate is the key to improving business competitiveness.

But members are coming under pressure to bump it up a percentage point or two to help pay for other tax cuts.

{mosads}Discussions about the corporate rate come as a conference committee prepares to reconcile the differences between the House and Senate tax bills. President Trump over the weekend suggested that the corporate rate could end up being 22 percent.

“It could be 22 when it comes out, but it could also be 20. We’ll see what ultimately comes out,” he said.

The prospect of a slightly higher corporate rate has generated pushback from business groups and prominent outside conservatives.

The National Association of Manufacturers, which is pushing for a 15 percent rate, said in a letter Wednesday that “manufacturers would have significant concerns with proposals that would increase the corporate tax rate beyond 20 percent.”

Americans for Tax Reform President Grover Norquist said that raising the corporate rate above 20 percent is “dangerous” and could set a precedent that the rate could continue to be increased over the years.

“There’s no stopping point,” he said.

Among Republicans on Capitol Hill, there’s a clear preference for keeping the corporate rate at 20 percent in the final bill. GOP lawmakers have noted that a 20 percent corporate rate is lower than the average among industrialized countries.

“I’m continuing to make the point that [the] 20 percent rate ought to be our goal and ought to be what we’re shooting for,” said House Ways and Means Committee Chairman Kevin Brady (R-Texas), who will also serve as chairman of the conference committee.

“Having said that, we’re anxious to get to conference and have that discussion,” he added.

Another conference committee member, Sen. Tim Scott (R-S.C.), said that “2 percent more changes the distributional burden and tables. It also opens up [the] floodgate for more requests, more need for offsets.”

There are numerous reasons to think Republicans could be forced to hike the corporate rate above the magic 20 percent threshold given other demands they are facing.

Most notably, lawmakers want to scale back or undo the Senate bill’s retention of the corporate alternative minimum tax, which a leading coal company executive this week said would undo all of the good Trump has done for his industry.

Lawmakers are also considering allowing some type of deduction for state and local income taxes, something that could be necessary to secure votes in the House.

Democrats have hammered the GOP bills as a hand-out to corporations, and tax hikes on many households — particularly in the Northeast — have given the minority ammunition.

Any changes would need to be offset in order to adhere to the budget resolution lawmakers adopted in October, which only allows the tax bill to add up to $1.5 trillion to the deficit over 10 years.

That’s why bumping up the corporate rate to 21 percent or 22 percent could be attractive, as it could pay for more generous tax cuts elsewhere.

White House officials on Thursday weren’t going out of their way to hammer home the importance of the 20 percent rate.

Kevin Hassett, chairman of the White House Council of Economic Advisers, said Thursday at an event hosted by the American Council for Capital Formation that the president’s comments reflect his awareness that things can change in a conference committee. He added that a slightly higher corporate rate wouldn’t necessarily undermine the bill’s positive effects.

White House press secretary Sarah Huckabee Sanders said that the White House wants the lowest corporate rate possible.

“Fifteen is better than 20. Twenty is better than 22. And 22 is better than what we have,” she said.

Sen. Rob Portman (R-Ohio), who is also on the conference committee, was hopeful that the rate will stay at 20 percent.

“I don’t think people think it’s a good idea to make our workers uncompetitive,” he said.

But Portman also acknowledged that there are “revenue concerns.”

There’s also pressure to keep the corporate rate at 20 percent from GOP lawmakers who are not part of the conference committee.

Rep. Dave Brat (R-Va.), a member of the conservative House Freedom Caucus, said that a rate above 20 percent would be a non-starter for him personally.

“The worst thing you can do is start raising rates,” he said. “That defeats the whole pro-growth logic.”

Sen. David Perdue (R-Ga.) said keeping the corporate rate at 20 percent is “very, very” important to him.

Perdue said he and other lawmakers have already negotiated to set the rate at 20 percent, instead of 15 percent.

“My rate to start with was 15. I settled on 20 when we negotiated all these other benefits both on the individual side and on the pass-through side. Now people want to come back after they negotiated all that and renegotiate,” he said. “I have a real problem with that. That’s not the way business operates.”

But some Republicans would be open to a corporate rate above 20 percent.

Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah) offered an amendment to the Senate bill last week to expand the child tax credit and pay for doing so by increasing the corporate rate to 20.94 percent, though it was voted down in part because many Republicans wanted to maintain the 20 percent rate.

Perhaps significantly, Rep. Mark Walker (R-N.C.), the chairman of the conservative Republican Study Committee — which has more than 150 GOP members — said that a higher rate would not automatically cause him to oppose a bill.

“It causes some pause, but if we can be convinced that it levels out some other areas that we’re concerned about, then it’s not a deal-breaker,” he said.

Alexander Bolton contributed.