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Budget Clouds White House Framing of Revenue-Neutral Tax Reform

Posted on May 26, 2017 by Luca Gattoni-Celli

Confusion persisted May 25 around the fiscal 2018 White House budget proposal’s assumption that tax reform will be revenue neutral under static scoring, as Treasury Secretary Steven Mnuchin reiterated that the Trump administration would target economic growth to maintain revenue.

“I’ve repeatedly said that [tax reform] would be paid for with economic growth and base broadening,” Mnuchin said at a Senate Finance Committee hearing on the administration’s tax reform policies.

Mnuchin's comments came as Office of Management and Budget Director Mick Mulvaney told the Senate Budget Committee that he did not know whether the White House tax reform plan would be revenue neutral on a static basis.

Budget Committee member Bob Corker, R-Tenn., asked Mulvaney to affirm recent comments he attributed to a White House official that the administration’s tax reform proposal will be offset on a static basis every year of the budget window.

But Mulvaney demurred, saying he was unfamiliar with the statement, and the White House did not respond to a request for comment by press time. 

Corker was referring to a May 23 Politico Magazine article, which cited a senior OMB official as saying that the administration intends to propose tax increases to offset its proposed tax cuts, but is deciding which loopholes and deductions to cut. “What the budget is saying is that tax reform will be paid for,” the official said, according to the magazine. “There’s a large conversation to be had about how we’re going to do it.”

Mnuchin is taking the lead on discussions with the House and Senate about tax reform, Mulvaney told Corker, noting for his own part that he had “no idea of where we are in that process.”

“I know that when we had to lock in our numbers” to develop the budget, Mulvaney said, the OMB had to assume that tax reform would be revenue neutral, but he added, “I don’t think that’s any indication as to what the final bill will actually look like.”

Since the budget proposal was released May 23, the White House has faced criticism that the scoring of its tax reform proposal as revenue neutral contradicts the tax reform outline released last month, as well as President Trump’s previous claim that he would be proposing the largest tax cut in U.S. history. That contradiction has led to accusations that the budget may reflect an attempt to double-count the growth feedback effects of those tax cuts both as offsets for those same tax cuts and for achieving a balanced budget.

The May 25 Senate hearings mirrored a pair of May 24 House hearings on Trump’s budget.At the Finance hearing, Mnuchin reiterated that the administration will offer a menu of revenue estimates for its plan, including a dynamic score developed by Treasury.

Jonathan Curry contributed to this article.

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