This is going to be a big week with regard to President Trump fulfilling his campaign promises. The WSJ reports that Donald Trump will order a corporate tax cut to fifteen percent, which will add some 2 trillion dollars of extra debt in the process in the first phase.
The tax-cut announcement is expected for Wednesday while the POTUS has ordered his Goldman Sachs cabinet to double down on their efforts for creating a comprehensive tax plan via, let me quote:
“slashing the corporate rate to 15% and prioritizing cuts in tax rates over an attempt to not increase the deficit”
In laymen’s terms, provided there’s no extra source of revenue for the Federal Government whilst drastically cutting taxes, Trump’s plan will basically put a huge stress on deficit, which will be funded by massive debt. And that will not sit well with the conservatives and needless to say, we’ll have to expect a fierce push-back in the Congress against The Donald’s plans.
Basically, the massive tax cut will have to be funded by an equally massive debt, at least in the beginning, there’s no way around it. Trump’s Goldman Sachs cabinet, i.e. National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin are expected to meet Tuesday for discussing the President’s tax proposal with the Senate Majority Leader Mitch McConnell, Senate Finance Chairman Orrin Hatch and House Speaker Paul Ryan among others.
Mr. Trump promised a corporate tax reduction from the actual 35% to 15%, which will most probably increase the budget deficits. As some put it: Helicopter money via debt monetization of taxes. Treasury Secretary said on Monday to reporters that, let me quote:
“The tax plan will pay for itself with economic growth,”
However, any plan that will end up with adding to budget deficits will be very hard to sell on Capitol Hill, for both partisan and procedural reasons.
It will be also difficult for Republicans to pass legislation which will require a deficit financed tax-cut without a little help from the DEMs in the Senate, as Democrats are against cutting taxes for the big corporations, while President Trump is trying to slash on federal spending programs (environment, arts, housing etc).