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Mnuchin Reaffirms Support for Revenue-Neutral Tax Reform

Posted on June 14, 2017 by Luca Gattoni-Celli

Prospects for bipartisan tax reform appeared dim June 13 as Senate Budget Committee Democrats prodded Treasury Secretary Steven Mnuchin about the so-called Mnuchin rule and pressured him into reaffirming the Trump administration’s support for revenue-neutral tax reform. 

Appearing before the panel, Mnuchin did not mention tax revenue in his opening statement, but asserted that “we’re very concerned about the deficit,” after Budget Committee member Sheldon Whitehouse, D-R.I., challenged dynamic scoring of tax reform. “And yes, look, we need to make sure that if we have tax reform — which is not just tax cuts, but tax reform — that it’s paid for and accounted for,” Mnuchin said.

As he had May 18, Mnuchin said the White House might soon release a more detailed tax reform plan than the single-page outline it unveiled April 26. “The devil is in the details, and we hope that that’s something that we can release soon,” he told Whitehouse.

“We hopefully will soon have a more detailed plan that we can release,” Mnuchin told Sen. Chris Van Hollen, D-Md. When that plan comes out, “I’m more than happy to get grilled on the details of it,” the secretary added, echoing his comments to Democrats at a June 12 House Appropriations subcommittee hearing. “Again, we’ve said, this tax plan will be paid for.”

Budget Committee Chair Michael B. Enzi, R-Wyo., used the hearing to tout his United States Job Creation and International Tax Reform Act of 2012 (S. 2091), an international framework that Mnuchin said the administration had studied as it prepared for tax reform.

Budget Hurdles

Whitehouse noted potentially conflicting statements that Mnuchin and Office of Management and Budget Director Mick Mulvaney initially made about the assumption of revenue-neutral tax reform under static scoring in President Trump’s fiscal 2018 budget proposal.

Mulvaney more recently said the budget does not reflect the administration’s tax reform thinking, telling The Washington Examiner, “In fact, several folks in the White House have said that they are interested in pushing a larger tax bill that would add to the deficit.”

The OMB director’s comments led tax observers to question whether deficit-boosting tax reform could survive the budget reconciliation process. The Senate's Byrd rule bars legislation that would increase the deficit outside the federal budget window, traditionally set at 10 years.

The White House did not respond by press time to an inquiry regarding its position on revenue-losing tax reform or how that legislation would reach Trump’s desk. It was also silent on the timing of any imminent tax reform announcement.

Whose Rule Is It?

For the second day in a row, Mnuchin faced Democratic questions about his remark shortly after being nominated that “there will be no absolute tax cuts for the upper class.” That was an ideal, Mnuchin said June 13, and he emphasized the importance of middle-income tax relief. The secretary also reiterated that Democrats had willfully coined the term “Mnuchin rule.”

Senate Finance Committee ranking minority member Ron Wyden, D-Ore., said that despite his own long-standing commitment to it, “We will not get bipartisan tax reform when the secretary of Treasury walks back a pledge to have no absolute tax cuts to the wealthy.”

Picking up on Wyden’s comment, Senate taxwriter Patrick J. Toomey, R-Pa., told Mnuchin that bipartisan tax reform clearly would not happen, leaving the GOP to pursue reconciliation.

“Your emphasis on economic growth — I think that’s exactly right,” Toomey said, outlining the procedural obstacles to advancing tax reform and asking Mnuchin about using a longer budget window to loosen the Byrd rule’s constraints, an idea Toomey was early to endorse.

“You’re in this bind, where you’re stuck with a temporary tax code, one that has to expire at the end of the budget window, so I would just like to suggest that you seriously consider a longer budget window,” Toomey told Mnuchin.

In lieu of bipartisan support, the best alternative to permanent tax reform would be a “temporary, great tax code, but making it long enough that we can actually enjoy the benefit,” Toomey said.

Mnuchin responded that he is hopeful for some bipartisan support but agreed that otherwise, budget reconciliation is an alternative. “I look forward to working with you and the Senate on ideas such as a 20-year window as opposed to a 10-year window, to explore that,” Mnuchin told Toomey, echoing previous comments by Mulvaney.

Follow Luca Gattoni-Celli (@TheGattoniCelli) on Twitter for real-time updates.