US President Donald Trump is pushing for the corporate tax rate to be reduced to 15 per cent, ahead of a key announcement on tax on Wednesday.
The move would mean more than halving the tax rate, a radical shake-up in the US tax system, but Mr Trump is likely to face resistance in Congress where Republicans are wary of any measure that might increase the deficit.
In particular, senior Republicans such as House Speaker Paul Ryan are strongly opposed to any move that would not be matched by alternative funding.
US Treasury Secretary Steve Mnuchin said on Monday that the tax cuts proposed on Wednesday would be offset by economic growth. Mr Ryan has been a strong supporter of a proposed border-adjustment tax which would tax imports coming into the United States and help offset any cut in the corporate tax rate. It is estimated that a border adjustment tax could generate up to $1 trillion.
But that idea has been losing support among many Republicans who fear its impact on importers and consumers.
The negotiations over corporate tax are tied in with high-stakes budgetary discussions this week on Capitol Hill as the US government works to avoid a shut-down this weekend. Lawmakers must pass a series of measures on budgetary spending before funding streams for some federal agencies expires at midnight on Friday.
Mr Trump is seeking approval for funding for his controversial wall between the United States and Mexico, which the Department of Homeland Security estimates could ultimately cost more than $21 billion. But there are reports that Mr Trump could accept a commitment to fund the wall at a later date.
Speaking on Fox News on Tuesday, Trump advisor Kellyanne Conway said: "Building that wall and having it funded remains an important priority to him but we also know that that can happen later this year and into next year, and in the interim you see other smart technology and other resources and tools being used toward border security."
The call by the White House for a 15 per cent corporate tax is likely to be the opening gambit in a complex negotiation process which is likely to lead to a higher tax rate.
Negotiations were continuing between the House and Senate leadership and the Trump administration, represented primarily by the Director of Management and Budget Mick Mulvaney in a bid to secure a deal before the week-end.
With the US president approaching the 100-day mark of his presidency this weekend, he is eager to push through a number of legislative proposals.
Lawmakers on both sides of the divide are keen to avoid the government shut-down which effectively closed government agencies for 17 days in 2013 and became a symbol of the tensions between the Obama administration and Congress.
