Accompanied by a Democratic senator, President Donald Trump took to the road again on Wednesday to whip up political support for tax cuts with broad promises that lower corporate taxes would buoy the fortunes of ordinary Americans.
Speaking at the Tesoro oil refinery in Mandan, North Dakota, Trump reiterated his oft-made claims that the United States’ high corporate taxes are to blame for slow economic growth and stagnant working-class pay. But he revealed no new details about what he wants from Congress.
The speech was the latest installment of campaign-style events aimed at passing tax reform that began with a speech in Springfield, Missouri, a week ago and will occur on a virtually weekly basis until Congress passes legislation, according to the White House.
This time, however, Trump had the benefit of Sen. Heidi Heitkamp (D-N.D.) by his side, important for the president as he tries to cajole red-state Democrats into at least entertaining his plans to revise the tax code.
“I want all of America to be inspired by what’s happened in North Dakota and the North Dakota example,” Trump said. “This state is a reminder of what can happen when we promote American jobs instead of obstructing them, which has been happening, believe me.”
North Dakota has a top corporate income tax rate of 4.31 percent, which is on the lower end of the 44 states that collect such taxes. Thanks to an oil and natural gas boom that has little to do with taxes, the state had an unemployment rate of 2.2 percent in July, the lowest of any state in the country.
As a presidential candidate, Trump cast himself as a one-man panacea, famously promising that he “alone can fix” the country’s broken political system in his speech accepting the Republican presidential nomination.
But in North Dakota on Wednesday, Trump, seemingly chastened by the defeat of efforts to repeal the Affordable Care Act, claimed that Congress would pass tax reform “only if you demand it.”
Trump appealed to them to call members of Congress, offering a script that he suggested should have particular traction with elected Democrats.
”You can remind them that both of the Reagan tax cuts were passed by a Democratic majority in the House, a Democratic Speaker, and the vast majority of Democrats in the Senate – including a Democratic senator from the great state of North Dakota,” he said. “So it can happen.”
“You listening Heidi?” he added, referring to Heitkamp. “Yes, Heidi’s listening. Yeah, she heard that. Thank you Heidi.”
“We’re not gonna put her on the spot! I’m not gonna put her on the spot!” Trump concluded, drawing laughs as he pointed toward her offstage.
Heitkamp is up for reelection in 2018 in a state Trump won by nearly 36 percentage points in November.
“If Democrats don’t want to bring back your jobs, cut your taxes, raise your pay and help America win – voters should deliver a clear message: Do your job to deliver for America, or find a new job,” he said.
Heitkamp joined Trump at the event after traveling with him there from Washington, D.C., on Air Force One, appearing onstage at the beginning of Trump’s speech with fellow North Dakota Sen. John Hoeven, Gov. Doug Burgum and Lt. Gov. Brent Sanford ― all of whom are Republicans.
She has not committed to supporting Trump and congressional Republicans’ tax reform legislation. In a statement about the event on Friday, Heitkamp emphasized her desire to reform a tax code that too often leaves her constituents “twisting in the wind” without laying out explicit conditions for her support.
“I’ve been pushing for both sides of the aisle to work together in Congress toward permanent, comprehensive solutions that will do away with loopholes and handouts for special interests and instead promote our small businesses, farm economy and energy industries with the fiscally responsible reforms they need to grow and expand,” Heitkamp said Friday.
Trump is courting Democrats in order to ensure passage of more ambitious tax reforms.
The Democratic minority in the Senate has the power to filibuster permanent changes to the tax code that add to the projected budget deficit.
To avoid a filibuster on the long-lasting reductions favored by movement conservatives and big business, Trump needs the votes of at least 8 members of the Senate Democratic Caucus.
Trump and congressional Republicans could bypass Democrats altogether by using a process known as budget reconciliation to enact tax changes, a move that would only require a simple majority in the Senate. But budgeting rules would require that legislation to sunset after 10 years if it increases the deficit. That’s why the budget-busting income and capital gains tax cuts enacted by then-President George W. Bush in 2001 would have all expired at the end of 2010 absent legislation that extended them.
It is not surprising that Trump is courting Heitkamp, a moderate up for reelection in a Republican state who has bucked her party leadership in the past. She was one of three Democrats who voted to confirm Trump nominee Neil Gorsuch as a Supreme Court justice in April.
Other centrist Democratic senators up for reelection in 2018 in states that went heavily for Trump include Sens. Joe Manchin (W.Va.), Jon Tester (Mont.), Joe Donnelly (Ind.), Bill Nelson (Fla.) and Claire McCaskill (Mo.).
Unlike Heitkamp, McCaskill did not join Trump at his speech promoting tax reform in her home state last Wednesday. In his remarks, Trump called McCaskill out by name, admonishing Missourians not to reelect the senator if she did not cooperate with Trump’s tax agenda.
“If she doesn’t do it for you, you have to have to vote her out of office,” he said.
Even as Trump tries to win over Democratic lawmakers to his cause, liberal groups are pushing in the opposite direction. Not One Penny, a coalition of left-leaning groups founded on the principle that millionaires and wealthy corporations should not get a penny more in tax cuts, announced Wednesday that it is targeting Heitkamp and other potentially shaky Democratic lawmakers with a five-figure television ad buy to discourage them from working with Trump.
Trump has offered a relatively broad framework to Congress for reforming taxes. He has proposed lowering the top corporate tax rate from 35 percent to 15 percent, but is reportedly open to reducing it to between 20 and 25 percent. He would try to discourage corporations from using accounting gimmicks to stash money overseas by switching to a so-called “territorial system,” in which corporations are not taxed on profits made in foreign countries.
He has also vowed to lower individual income tax rates without specifying what he would like them to be, simplify the tax system so every American can complete their tax returns on a single sheet of paper, and eliminate the estate tax on the financial assets of wealthy people after they die.
The president has said he will pay for the tax cuts by closing loopholes that disproportionately benefit the wealthy and special interests.
But most experts believe this is either mathematically impossible or politically unfeasible. Ending the tax deductions that cost the Treasury the most in lost revenue, such as the mortgage interest deduction and the differential taxation of capital gains and dividends, either benefit middle-class households or a powerful constituency like large investors.
Trump’s policy rationale for reducing corporate taxes has also come under scrutiny from experts.
He claimed again at the event on Wednesday that the U.S. has the highest corporate tax rate in the world.
In fact, while the U.S. has a high official rate, corporations use deductions and other credits to pay considerably less than that ― in many cases enjoying a lighter burden than foreign competitors. In practice, the average U.S. corporation pays a tax rate of 18.6 percent, according to the Congressional Budget Office ― lower than the average in Argentina, Japan and the United Kingdom.
And it is not at all clear that there is a correlation between tax burdens and the willingness of corporations to invest in domestic growth. Between 2008 and 2016, median employment at 92 profitable U.S. corporations with tax rates under 20 percent actually declined by 1 percent, according to a report by the Institute for Policy Studies.
Contrary to what Trump claims, moving to a so-called “territorial tax” system would actually encourage corporations to offshore their profits, by exempting foreign profits from U.S. taxes, according to Chuck Marr, director of federal tax policy at the Center for Budget and Policy Priorities, a liberal think tank.
“It is against the interest of workers in the United States,” Marr said.
“The economic narrative of the campaign was that you had these working-class people who have too long been ignored,” he added. “Then when it comes time for his plan, when he’s moving around trillions of dollars around, those people are ignored. That’s a betrayal.”
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