Economic advisers to the White House have suggested President Trump propose a new minimum tax on corporations as part of his election year “tax cut 2.0″ package, two people briefed on the planning said, hoping to address criticism that the 2017 tax law allowed many of the country’s largest firms to virtually eliminate their federal tax burden.

The idea, which is part of preliminary discussions and has not been officially endorsed, could attempt to blunt criticism from Democrats that the GOP tax law allowed many large corporations to wipe out their federal corporate taxes altogether. The plan could also help generate revenue that might be used to offset the impact of new, middle class tax cuts. Trump has promised he would roll out a middle class tax plan before the 2020 presidential election.

The 2017 tax law lowered the corporate tax rate from 35 percent to 21 percent, but it allowed companies to continuing using loopholes and tax breaks to lower their taxes even further. The tax law also eliminated the corporate alternative minimum tax, which was supposed to prevent companies from overusing deductions to avoid paying any taxes.

Democrats and critics have said this tax cut was heavily weighted toward the rich and corporations, and the component that benefits households is set to expire in a few years. Some advisers to the president fear a political backlash because of reports that some corporations have paid little or no taxes since the law’s enactment, an issue seized on by some of Trump’s top presidential rivals.

Both outside advisers to the president and White House officials strongly cautioned that the process is in preliminary stages and that no decisions have been made about the shape of a new tax cut package. Many of them spoke on the condition of anonymity because they weren’t authorized to discuss the internal deliberations.

“Trump has been very clear: He wants this to be really targeted for people in the middle,” said one person involved in the effort. “They are hunting for ideas and looking at what we can to do offset some of this stuff.”

Proposing a minimum tax on corporations could be interpreted by critics as an extraordinary admission by the White House that its 2017 tax cut went too far in slashing business rates.

The potential tax plan also underscores the enormous political and policy challenges the White House will face in crafting a second tax cut proposal in time for the 2020 election, in part because the White House appears to have overestimated the economic benefits that would result from the 2017 law.

External advisers to the White House have discussed constructing a $1 trillion tax cut package that is aimed at the middle class by lowering rates and expanding tax-free savings accounts. They have also discussed putting limits on the amount of state and local tax payments that companies are able to deduct from their federal taxes, people involved in the talks said.

“The White House is studying numerous proposals that will benefit the middle class and the American worker and promote long-term economic growth,” White House spokesman Judd Deere said.

Limiting state and local tax breaks for corporations would reprise one of the most bitter fights of the 2017 tax cut, which capped how much individual households could deduct in federal taxes from their state and local taxes. This provision, known as the “SALT” cap, was attacked as an attempt by Trump to disproportionately raise money by taxing Democratic-run states with higher state and local tax burdens, such as California, New Jersey and New York.

“It’s blue states that tend to have higher state corporate tax rates, and so they would be the ones hit most by a corporate SALT cap,” said Ernie Tedeschi, a former economist for the Obama administration.

After the tax law was passed, corporate tax payments came in about 40 percent lower than had been projected before any changes were made, according to the Brookings Institution, a Washington think tank. The White House said the tax cuts would lead to a surge in new business investment, but business investment contracted much of last year. The White House also predicted that the tax cuts would help the economy grow 3 percent in 2019, but it instead grew 2.3 percent.

The 2017 tax cut is projected to increase the national debt by close to $2 trillion over 10 years, according to nonpartisan estimates, drawing criticisms against Trump of fiscal profligacy as the annual deficit rises above $1 trillion.

Opponents of the tax law such as presidential candidate Sen. Bernie Sanders (I-Vt.) have assailed the GOP and multibillion-dollar corporations for allegedly paying $0 in federal taxes under the new law. Ninety-one companies on the Fortune 500 paid $0 in federal corporate taxes in 2018, more than double the amount in previous years, according to a left-leaning policy group, although experts caution it’s difficult to draw exact comparisons to prior years.

The average federal tax rate of the country’s largest 400 corporations was about 11 percent in 2018, the lowest rate since at least 1984 and a steep drop from the average 21 percent rate paid between 2008 and 2015, according to the Institute on Taxation and Economic Policy.

Companies have defended their low corporate tax burden, with some noting they are either deferring tax payments into future years or using new deductions intended to encourage new business investment. Republicans and conservative tax experts also say the business tax cut helped spur economic growth and dramatically increased business investment in the economy. The economy grew 2.9 percent in 2018, a three-year high.

“Americans are returning to the workforce, and consumers have more money in their pockets. President Trump’s economic program is leading to more jobs and higher wages for hardworking Americans,” Treasury Secretary Steven Mnuchin said in a statement last year.

Larry Kudlow, the White House economic adviser leading the tax effort, has said the proposal will probably be released in September, although officials have been promising a new tax cut plan since 2018 and have yet to provide concrete details.

White House advisers have also floated expanded tax-free savings accounts in the “2.0” package to increase the amount of money available to lower- and middle-income households. Kudlow told the New York Post this month that the package may include “Universal Savings Accounts” that would allow Americans to make more tax-free investments, although details remain vague.

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