Two top Trump administration officials said it may not bepossible for President Donald Trump to deliver on his promise tocut corporate tax rates to 15%.

In separate appearances Tuesday, Treasury Secretary StevenMnuchin and Marc Short, Trump's legislative affairs director, bothsaid Trump is still committed to that rate cut—down from thecurrent 35%—but acknowledged the potential for compromise.

“The president has made it clear since the campaign, ideallyhe'd like to get it down to 15%. I don't know if we'll be able toachieve that given the budget issues, but we're going to get thisdown to a very competitive level,” Mnuchin said at CNBC'sDelivering Alpha conference in New York. “What the exact number isless important, what's important is making sure we have acompetitive system.”

“Ultimately there's probably compromise to get to the bestdeal,” Short told reporters at an event sponsored by the ChristianScience Monitor. He also said that Trump continues to believe thata 15% corporate rate would best stimulate the economy, whileconvincing American businesses to keep their tax addresses in theU.S.

Trump also wants to apply the same rate to certain pass-throughbusinesses, such as S corporations and partnerships, which don'tpay taxes themselves, but pass their earnings through to theirowners, who pay taxes at their individual rates, Mnuchin said.However, he said “service companies that are pass-throughs will notget the benefit of the rate.”

“If you earn money that's clearly income, if you're anaccountant firm and that's clearly income, you'll be taxed atincome rates—you won't be taxed at pass-through rates,” Mnuchinsaid. “If you're a business that's creating manufacturing jobs,you're going to get the benefit of that rate because that's goingto be passed through to help create jobs and better wages.”

Mnuchin also repeated that Trump is committed to eliminating thespecial tax treatment of carried interest, but not for all theinvestment firms that make use of it. “The president's been veryclear that hedge funds will not have the benefit of carriedinterest,” he said. But other firms— “entities that do createjobs,” Mnuchin said—may still qualify.

Carried interest is the portion of an investment fund's returnsthat are paid to investment managers. It's currently taxed ascapital gains, at rates as low as 20%. The top individual incometax rate is 39.6%, though Trump and congressional Republicans haveproposed cutting it to 35%.

Trump is planning an aggressive travel schedule, taking him toas many as 13 states over the next seven weeks, to sell the idea ofa tax overhaul as the administration tries to avoid repeating thecommunications failures of its attempt to repeal Obamacare.However, Republican leaders have yet to unveil details of whatTrump has called a “massive” tax regime change, including suchbasic matters as where to set the corporate tax rate and how to setup individual tax brackets. Mnuchin and Short both said detailswill come later this month.

'Pretty Close'

The White House and members of Congress are “pretty close tofinalizing” a bill and have settled many of the disagreements thatdivided their effort early in the process, Short said. The WhiteHouse is wary of relying solely on Republican support for thelegislation after seeing the health care bill collapse and isgenuinely seeking Democratic support, Short said.

While the president is eager for a bipartisan tax deal—and histax tour will visit states where Democrats hold Senateseats—Mnuchin said that if needed, the administration willencourage Republicans to use the reconciliation process to get to60 votes. That would allow them to bypass a Senate filibuster andpass a bill on a partisan basis.

Mnuchin also said that he is considering backdating any taxchanges to Jan. 1 of this year, which “would be a big boon for theeconomy.”

While Trump is committed to a permanent tax overhaul, Mnuchinhas at times appeared to be managing down those expectations. “As Isaid this is a pass-fail exercise. Passing tax reform, which hasn'tbeen done in 31 years, that's a win,” the Treasury chief said,adding that stock markets have a “built-in” expectation ofsuccess.

Trump last week cut a short-term debt ceiling and governmentspending deal with Democrats to clear the deck for a major taxbill, but the agreement could complicate tax efforts by sowingdoubt among the GOP about its unpredictable president. As Mnuchinworked to sell an 18-month debt-ceiling increase to Republicans andDemocrats during a meeting in the Oval Office last week, Trumpabruptly decided to go for a three-month increase in line with whatDemocrats wanted.

“We could have done a one-year deal, this wasn't widelyreported, on the debt ceiling,” Mnuchin said Tuesday. “But thepresident wants to raise military spending. That's one of his mainpriorities, particularly in the mix of what's going on in NorthKorea and other areas. The president wants to increase militaryspending and that's something he is going to demand forDecember.”

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