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Wednesday, September 27, 2017

Trump to Propose Sweeping Tax Cut for Corporations and Individuals

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Over a meal that ended with apple pie, Mr. Trump also said that repatriation of taxes on corporate profits kept offshore would be part of the plan. He did not describe changes to carve-outs or deductions, according to a person in the room.

At one point, Mr. Trump said that getting the corporate rate down was the key to getting the economy to grow. The president said that he had grown tired of listening to foreign leaders, like India’s Narendra Modi, describe a gross domestic product close to 10 percent, while Mr. Trump had nothing comparable to show, according to the person, who asked for anonymity because it was a private dinner.

The White House is trying to navigate a narrow path on an issue that administration officials believe can reboot Mr. Trump’s presidency. It is an attempt to assuage the demand for lower taxes among wealthy party donors without being perceived by Mr. Trump’s working-class base as giving a windfall to the rich.

Mr. Trump promised after meeting with lawmakers on Tuesday that “we will cut taxes tremendously for the middle class.”

He will make his pivot to overhauling the tax code official on Wednesday during a speech in Indiana where he will unveil details of a plan that he has promised will be the biggest tax cut in history.

After the failure of Republicans to repeal the Affordable Care Act, passing tax legislation has become all the more crucial, and it is no accident that the Trump administration has chosen the Hoosier State, a reliably Republican part of the country. It is also the home to Vice President Mike Pence, its former governor, and it has a Democratic senator, Joe Donnelly, whose support Mr. Trump may need.

For Republicans who have been scarred by the experience of seeing tax cuts lead to fiscal shortfalls in states such as Kansas, South Carolina and Tennessee, Indiana represents a case study of where tax cuts worked.

“Our history of being a state that has reduced the size of government, specifically through Pence tax cuts in 2013, makes us an example of ‘here’s these tax cuts,’ and then seeing economic growth,” said Justin Stevens, the Indiana head of the conservative group Americans for Prosperity.

As governor, Mr. Pence signed legislation modestly reducing personal income taxes and taxes on companies. Coinciding with that, the state’s economy grew and unemployment declined. As of last year, Indiana’s gross domestic product ranked 16th in the United States and its unemployment rate last month was 3.5 percent, below the national level of 4.4 percent.

Mr. Trump on Wednesday will make the case that this is the recipe for economic success nationally, but some economists in the state are not certain that the local strategy can be replicated on a national scale. Michael J. Hicks, an economics professor at Ball State University, said it was too soon to say if the Pence tax cuts actually stimulated the state economy.

“On the right, you’re going to hear that by cutting taxes you’re going to have huge new tax revenues,” Mr. Hicks said. “But there’s no analysis that finds that.”

Indiana has also had to find new revenue to fund infrastructure projects and rebuild crumbling roads. This year, the state approved a 10-cents-per-gallon gas tax.

Finding money to pay for the Trump administration’s ambitious tax plan will be one of the bigger puzzles. Republicans say they are counting on a surge in economic growth and on the elimination of deductions to make up a fiscal shortfall that tax experts have suggested could amount to trillions of dollars.

Last week, members of the Senate Budget Committee agreed on a framework that would add to the federal deficit in order to pave the way for a $1.5 trillion tax cut over the next 10 years. The budget resolution still must pass both houses of Congress before work can begin in earnest on tax legislation, and some Republicans have already expressed reluctance.

Assessing the cost of the Republican tax framework will be difficult until more details are made available. Analyses of Mr. Trump’s previous plans and the House Republican blueprint from 2016 were estimated to reduce government revenues by between $3 trillion and $7 trillion over a decade.

Mr. Trump is expected to intensify his pitch to get Democrats on board with his tax plan.

Mr. Donnelly, who is seen as vulnerable in a state that voted heavily for Mr. Trump, is one of three senators who did not sign a letter from Democrats making demands that the tax plan not benefit the rich or add to the deficit. Mr. Trump will probably call him out directly on Wednesday.

During his meeting on Tuesday with Republicans and Democrats from the House Ways and Means Committee, Mr. Trump also made a pitch for bipartisanship.

“It is time for both parties to come together and do what is right for the American people,” he said.

But garnering support from Democrats will not be easy.

“Trump asked for Democrats to jump on the caboose after the tax train has already left the station,” said Representative Lloyd Doggett, Democrat of Texas, who complained that lowering top tax rates and repealing the estate tax would be a boon for the wealthy. “I saw no Democrat ready to jump on board.”

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