The new American administration outlined its simplistic plan to slash corporate tax from its current almost 39 per cent to 15 per cent. He also said that companies would no longer have to pay American tax on their worldwide earnings, but only on those made in the United States. But US President Donald Trump failed to make much impact with the much-anticipated announcement of his reform of America’s famously labyrinthine corporate tax laws. His one page document only gave some very broad outlines that had been revealed in advance, but added very little new detail. Any tax legislation has to go through Congress, where Trump has consistently failed to make much progress so far, so it is interesting that House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell and the top Republicans on the congressional tax-writing committees were reduced to welcoming Trump’s proposals, but adding that their ideas in the one-page document will serve as “critical guideposts” as Congress and the administration work on tax changes.

The problem with Trump’s plans is that they fail to outline how the government will make up the $2 trillion (Dh7.35 trillion) shortfall over 10 years in government revenue. That matters because if the government cannot balance its books over 20 years it will be required to reverse the legislation. Trump argues that the cut will generate enough economic growth to compensate for the loss, although that is disputed by many economists. Some senior Republicans in Congress have been working on tax reform for many years and they dismissed the new White House plan as not constructively contributing to a serious discussion of tax reform — thanks to its headline emphasis on tax cuts and failure to provide any details on how the loss in government revenue will be paid for.

One specific idea in Trump’s plan was to reduce the 35 per cent tax on corporate profits outside the US if the profits are repatriated into the country. American companies have $2.6 trillion of profits held in their subsidiaries outside the country to avoid paying US tax, which they could repatriate under a more favourable regime. An additional political wrinkle could be that if this one-off surge in government revenue was hypothecated to spending on infrastructure then it could attract votes from Democrats.

The announcement was typical Trump: Lots of noise with little substance, and all timed to get something in the headlines before his 100 days are up tomorrow.