Yahoo Finance Trump is keen to lower corporate taxes. Not all his GOP colleagues are on board.
Republicans are united around Donald Trump as their nominee, but where they are still divided is what to do about the 21% federal corporate tax rate if they control Washington next year.
Some are pushing for a corporate rate as low as 15%. Others have signaled a willingness to accept an increase up to 25%. Donald Trump's current position is notably right in the middle after he floated a 20% rate during a recent meeting with CEOs.
This emerging intra-party debate has only grown in urgency in recent days as the party sees the odds of a strong showing in November — perhaps even a GOP sweep — on the rise after Joe Biden's faltering recent debate performance.
The party is also preparing for its convention later this month where the tax issue is sure to be top of mind for many party leaders and donors.
It's a question that largely boils down to whether to make lower corporate rates a party priority versus other concerns. There may not be resolution for more than a year, but the different sides are staking out their positions now.
"Ultimately you want the rate as low as possible," said the Heritage Foundation's Richard Stern in a recent interview, arguing that the economic benefits of a cut outweigh the potential effects on America's exploding debt.
The larger issue within the party at the moment, he added, is whether the issue can be sold to voters.
"What you're looking at is people who are concerned with how popular cutting corporate taxes are going to be."
A wide-ranging debate
The concern over a backlash among voters is clearly an element behind commentary on the other side of the debate from some populist-minded Republicans.
Rep. Chip Roy is an influential House Republican who recently told Politico "there's a bubbling-up concern that we should not be doing the bidding of corporate America." He said he would be open to a corporate rate increase up to 25 percent if it helps pay for other priorities.
That point has been echoed by others, including powerful House Ways and Means Committee chair Rep. Jason Smith. The Missouri Republican said previously that some Republicans may be able to find an alliance with Democrats on increasing corporate taxes.
As for Democrats, they are much more unified on this issue. Biden has promised to try and raise the federal rate to 28% if he is re-elected. During an interview with ABC's George Stephanopoulos on Friday, Biden said a key goal of a second term would be to "straighten out" the tax system.
Key Democrats are also working to ensure that corporate taxes are front and center in 2025 as a way to lessen budget deficits and also make big businesses pay their "fair share."
How this debate within the GOP and across Washington ultimately shakes out will of course be strongly shaped by the election results this November. A strong showing by Democrats — especially a win for Biden — is likely to take corporate tax cuts off the table entirely.
But the ongoing GOP debate demonstrates how even a Republican sweep of the White House, the Senate, and the House may not provide immediate clarity on the corporate tax landscape.
The larger tax debate in the offing is over a series of individual tax provisions signed into law by then-President Trump in 2017, many of which expire at the end of 2025.
That same law lowered the corporate rate to 21% from 35% but did so permanently. That means the 21% rate is not formally up for debate at the moment, but both Democrats and Republicans are eager to put it on the table.
If Republicans do well this November, party leaders are already discussing passing tax reform using a process call reconciliation, which would allow them to enact it without a single Democratic vote if they stay unified.
Input from the business world
The business community will also have its say in this debate.
The Business Roundtable, an association of top business executives, recently announced plans to spend more than $10 million to get the message out that tax reforms are needed for global competitiveness.
The groups wants, at the very least, to retain the current 21% rate.
"Any increase to that rate would immediately place the US rate near the top of nearly all corporate rates amongst other major economies," noted Procter & Gamble (PG) CEO Jon Moeller during a recent roundtable with reporters. The P&G boss is heading up tax issues for the group.
The conversation around corporate taxes will happen in parallel with business tax provisions that will also be up for debate in 2025. These are incentives in the tax code for business activities like research and development as well as interest payments.
Many of those credits were also also signed into law in 2017, and many have already expired. Some package of new credits are widely expected to be part of next year's tax talks if they aren't addressed sooner.
The Heritage Foundation's Stern said that negotiations over tax levels could also bring in larger GOP concerns about the eagerness of corporate America to embrace social causes in recent years.
The larger charge among many in the party is that C-suites have often abandoned their fiduciary duty to shareholders, and that new regulations from Washington could limit their ability to take in things like environmental, social, and governance (ESG) issues into consideration.
Stern said he would like to see that issue addressed and "in some ways, the tax code is a place to enforce that."
It's a clear potential point of agreement across the party since Republicans of all stripes, including figures like Rep. Roy, often highlight what they call "woke capitalism."
Ben Werschkul is Washington correspondent for Yahoo Finance.
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