Senate GOP bill would delay corporate tax cut

Key Points
  • The Senate tax plan would delay a corporate tax cut until 2019, a source tells CNBC.
  • President Donald Trump wants the reduction to go into effect next year, while a House bill has called for an immediate change, as well.
  • Delaying the rate cut could save money as Republicans look for ways to offset the costs of the plan.
Senate GOP bill would delay corporate tax cut until 2019

The Senate tax plan set to be unveiled Thursday would delay and phase in a corporate tax cut, sources tell CNBC.

The move contrasts with a bill working its way through the House and the wishes of President Donald Trump.

The Senate, like the House, is expected to call for chopping the corporate tax rate to 20 percent from 35 percent. Republicans argue that the reduction will help to encourage companies to keep operations in the United States, hire more workers and boost wages.

One source told CNBC that the corporate tax cut would take effect in 2019. The Washington Post first reported a delay until 2019, citing four people briefed on the planning.

Trump wants to give an immediate cut, arguing that it will spark job and economic growth. Speaking at the Economic Club of New York on Thursday, Treasury Secretary Steven Mnuchin said the president would prefer a 2018 reduction but seemed to open the door to a one-year delay.

"The president would like this to go into effect right away. I think the sooner we get this, the 20 percent rate, the better it is for the economy, but the House and Senate are having to look at how we pay for all of this, including a major focus of the president is middle-income tax cuts, so these are things that are still being discussed," Mnuchin said.

"Obviously, right away is better than a year, but a year is better than obviously a longer phase-in," he added.

Delaying the corporate rate cut to 2019 could save $100 billion or more, the Post reported.

However, putting off the corporate tax cut could discourage businesses from investing in the U.S. or relocating their headquarters from overseas. To reduce that effect, the Senate would call for letting companies deduct capital investments in 2018, according to the Post.

Republican lawmakers are looking for ways to offset major tax cuts called for in their proposals. Under budget rules they plan to use to pass a bill, it cannot generate more than $1.5 trillion in budget deficits over a decade.

The Joint Committee on Taxation has estimated that a version of the bill proposed by the House would lead to a $1.7 trillion increase in federal deficits over a decade.

The House Ways and Means Committee is revising the bill before an expected Thursday vote to advance it. House Republicans aim to hold a full chamber vote on the plan next week.

Republicans aim to overhaul the American tax system by the end of the year. If they pass separate bills, lawmakers will have to reconcile the differences.

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