Just a few days after being sworn in as president, Donald J. Trump convened a meeting at the White House of some of the nation's most prominent chief executives to discuss how to improve manufacturing. Mr. Trump was joined by Elon Musk of Tesla, Mark Fields of Ford, Andrew Liveris of Dow Chemical, Marillyn A. Hewson of Lockheed Martin and Michael Dell of Dell, among others.
Before the meeting formally began, with cameras rolling, Mr. Trump wanted to talk about corporate tax rates — specifically lowering them. During one debate with Hillary Clinton, he had told voters: "Under my plan, I'll be reducing taxes tremendously, from 35 percent to 15 percent for companies, small and big businesses. That's going to be a job creator like we haven't seen since Ronald Reagan. It's going to be a beautiful thing to watch."
He repeated the 15 percent figure over and over again.
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However, when Mr. Trump spoke to the C.E.O.s that morning, he shifted the goal post slightly: "We're trying to get it down to anywhere from 15 to 20 percent."
Inside the White House, until last Friday, according to people involved in the conversations, the target rate had been bumped up again, to a minimum of 20 percent and very likely a bit more.
And now, given that the repeal of the Affordable Care Act is off the table — and with it the $1 trillion in tax cuts over the next 10 years that the administration needed to help make its tax plan deficit neutral — there is a good chance that any tax package would include a corporate rate that is even further from Mr. Trump's initial pledge, perhaps as high as 28 percent.
Don't take my word for it. That's the figure that Grover Norquist, the anti-tax activist who is the president of Americans for Tax Reform, and who has long sought the lowest rate possible, has calculated would be needed for the plan to be deficit neutral after 10 years. That way it could come under the heading of budget reconciliation, which would allow the Senate to pass legislation with a simple majority.
If the 28 percent corporate tax rate sounds familiar, that's because it is: It was the same rate that President Barack Obama proposed in 2012 and again in 2013, when he also proposed to lower the tax rate for United States manufacturers to 25 percent. He made the proposal again in 2014, 2015 and 2016. Each time, his tax plan was summarily dismissed by Republicans who called the rate too high and uncompetitive.
Now, Republicans may end up negotiating a tax package with a corporate tax rate that looks a lot like the one they rejected out of hand for the last five years.
Why is the rate so important?
Because almost all those on Wall Street — and in corner offices throughout corporate America — have been baking into their models a tax reform plan that they say will jump-start additional investments, leading to higher growth in the economy.
As an example, , the chief executive of AT&T, told analysts this year, "We know at AT&T that if you saw tax rates move to 20 percent to 25 percent, we know what we would do: We would step up our investment levels."
Some of those investments become harder to justify if the rate is higher, executives say. The Standard & Poor's 100-stock index already has an effective tax rate of about 28 percent, according to WalletHub.
The United States has the highest top statutory corporate tax rate among Group of 20 nations, according to a study by the Congressional Budget Office.
As evidenced by the stock market's pullback on Friday and again on Monday, investors and analysts are redoing their math to account for the fact that tax reform may not happen as soon as they expected — the Trump administration had said it would happen by August — and that rates will not come down as much as had been anticipated.
Speaker Paul D. Ryan, who oversaw the effort to repeal Obamacare, acknowledged that the bill's failure would "make tax reform more difficult."
He has yet to publish a new set of corporate tax rates, but his original plan called for a rate of 20 percent. That plan depended not only on Obamacare's repeal, to save $1 trillion, but also on another plan that seems increasingly unlikely to gain support: a so-called border adjustment tax — a euphemism for an import tax on all goods — that was expected to raise another $1 trillion over 10 years.
The border adjustment tax, an obsession of Mr. Ryan's, has divided Mr. Trump's advisers. Stephen K. Bannon has been a proponent, seeing it as an incentive for more companies to make goods here in the United States. Others, like Gary Cohn, Wilbur Ross and Steven Mnuchin, have been more ambivalent, people involved in the discussions say, in part because other countries could retaliate, making it harder for United States manufacturers to export goods.
Many American retailers, like Walmart, and even some manufacturers — including Ford and Fiat Chrysler, which make some car models in Mexico and Canada and import them into this country — have expressed their anxiety about how a border adjustment tax would affect their business.
Given the squabbling within the Republican Party over the repeal of Obamacare, it's hard to imagine that a congressman with constituents including big retailers — retail jobs outnumber manufacturing jobs in the United States by about four to one — would vote in favor of a border adjustment tax.
"The border adjustment tax, the most controversial piece of current tax-reform discussions, is less likely to pass," Société Générale wrote in a note to clients over the weekend. "If Congress fails to approve tax reform ahead of August, confidence is likely to slip. Congress could still pass a bill by the end of the calendar year, but even that could slip."
Without the $2 trillion in revenue and tax savings that the border adjustment tax and Obamacare repeal would generate, it is virtually impossible to see how the Trump administration could find a path to a corporate tax rate anywhere near what it originally promised. (Of course, the administration could pull back on its pledge to lower taxes for the middle class, but that seems unlikely.)
The trillion-dollar question is whether lowering corporate taxes would ultimately have the desired effect.
"While there is no doubt that tax policy can influence economic choices," a study by the Brookings Institution determined, "it is by no means obvious, on an ex ante basis, that tax rate cuts will ultimately lead to a larger economy in the long run."