Trying to cut taxes for all Americans through tax reform without also providing disproportionate cuts for wealthy individuals poses a challenge for the government, Treasury Secretary Steven Mnuchin said October 13.
“It’s hard to create a system where you’re not going to . . . cut taxes on the top 10 percent” when 10 percent of taxpayers pay over 80 percent of the tax under the existing system, Mnuchin said at a conference sponsored by the Institute of International Finance in Washington. “What we’re trying to do is not create disproportionate tax cuts for the top,” he said.
According to Mnuchin, one area in which reform would create a disproportionate result is the effort to repeal the estate tax, which was proposed in the Republican tax reform framework released September 27. After conceding that estate tax repeal “disproportionately helps rich people,” Mnuchin defended the proposal, saying that the administration thinks it’s “fundamentally unfair” to tax people at death. “It’s a philosophical issue; it’s an economic issue; and people who have family businesses should be able to pass them down,” he said.
Providing a glimpse into the administration’s tax reform timeline, Mnuchin said the goal is to pass legislation before the end of the year. “The budget just passed the House. We’re hoping it passes the Senate next week . . . and then we’ll drop the [tax reform] bill” while the budget resolution is in conference, he said.
There may be some slight differences between the House and Senate versions of the tax reform bill, but “we’ll work together to try to get the majority of it the same,” Mnuchin said, adding that they want to get the final bill “on the president’s desk at the beginning of December.”
House Speaker Paul D. Ryan, R-Wis., indicated October 12 that the House could stay in session until Christmas Day to pass tax reform legislation.
When asked about permanence regarding the tax cuts being proposed, Mnuchin said, “Parts will be permanent, and parts will be temporary.” Shifting from a worldwide system to a territorial system is one aspect of the package that “absolutely [has] to be permanent,” he said.
“When you go from a worldwide system to a territorial system, you can’t tell people 10 years from now you can go back to worldwide. You can’t unwind that,” Mnuchin said.
On the other hand, Mnuchin said the tax reform proposal provides only five years of automatic expensing. “That’s to incent people to invest money now, and it’s a lot cheaper than giving it to them for 10 years,” he said.