By Alan Murray and Geoffrey Smith
April 25, 2017

Good morning.

The big news this morning is that President Trump has told the Treasury Department to cut the corporate tax rate to 15%. That makes clear we are no longer talking about tax reform, but rather tax cuts—Reagan circa 1981 rather than 1986. There’s no indication the administration has plans to offset the cost of that $2 trillion tax cut by closing loopholes, adopting a border adjustment tax, etc. Rather, they will rely on the argument that the tax cuts will increase growth and thus increase revenues enough to offset the loss. (I’m sure a corporate tax cut could spur growth; but if anyone has any evidence that it will “pay for itself,” please send my way.)

Can such a plan pass Congress? The obstacles are significant:

—The plan will get no Democratic support, which means it will have to be passed as part of budget reconciliation, so it can avoid filibuster.

—The Joint Committee on Taxation won’t agree that such a tax cut pays for itself, which means under budget reconciliation rules it will have to expire within ten years.

—Republican deficit hawks in Congress, who have been struggling to do an honest tax reform plan, will be hard-pressed to swallow this one. Can Trump make them do it? Stay tuned.

News below.

Alan Murray
@alansmurray
alan.murray@fortune.com

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