Mnuchin's Summer Job (Feb. 23)

Update 164 — Mnuchin’s Summer Job:
Tax Reform by July, a Snowball’s Chance?

This morning, Treasury Secretary Steve Mnuchin outlined an “aggressive timeline” for passing tax reform, saying comprehensive reform of the U.S. tax code would be signed this summer.   In an interview this morning with Maria Bartiromo, Mnuchin said the administration is aiming to get its “very significant” tax reform passed before August recess.

The Secretary’s timeline is off for a number of reasons, one of which is simply that recess begins at the end of July. That means that when Mnuchin says August, he actually means July, or in other words, five months from now.  More below.

Best,
Dana
——-

Tax Timetable 

The implementation of the president’s tax reform will come in three different stages, according to Mnuchin.

 

•  Passage – passage and signing of the bill, slated for July of this year.

•  Implementation – which the Secretary says is set for the remainder of 2017.

•  Impact – economic benefits, which Mnuchin says we won’t be able to see till late 2018.

 

Mnuchin insisted that tax reform is truly the administration’s top legislative priority.  The interview, which is rich in signals regarding the administration’s tax reform goals and strategy, (and is his first television interview since taking office last week) can be watched here.

“We are committed to pass tax reform. It will be very significant. It’s going to be focused on middle income tax cuts, simplification and making the business tax competitive with the rest of the world,” said Mnuchin.

 

Mnuchin said the administration would use these higher growth assumptions in calculating its budget plan.  “We believe in dynamic, not static, scoring,” he said.

 

“We’re working behind the scenes very carefully. We’re running a lot of numbers and we’re taking into account a lot of issues,” he said. He said the administration hoped to have a proposal ready to unveil in “the near future, and we’re committed to get this passed by August.”

Congressional Congestion

Consider:

•   ACA — Its first priority is repealing and replacing Obamacare, but lawmakers have yet to present a plan and disagreements continue.

•  the Senate is also considering Supreme Court nominee Neil Gorsuch, who needs 60 votes to beat a filibuster.

Republicans are eight votes short of that number.

•. Congress is already considering pushing President Trump’s plan to spend $1 trillion on infrastructure to next year

Secretary Mnuchin did not highlight it this morning.  Mnuchin predicted that President Donald Trump’s economic proposals will be able to boost growth significantly to annual rates above three percent.

 

He warned, however, that full implementation of the reforms, evidence of their stimulus effect, and other economic benefits might have to wait until 2018.

 

The Plan

The plan will outline many specifics of the trillion-dollar infrastructure plan, for example, which the administration has stated would be largely funded by the private sector through incentives like tax credits. The tax plan is also set to outline border taxes, which are a major component of Trump’s trade policies.

 

The NYT was less than sanguine about the prospects of a tax reform bill passing in Congress by August:

 

“That is an ambitious timetable, even with Republicans controlling Congress and the White House. There are major differences between the House of Representatives and the Senate, which will most likely come up with a separate proposal. One senator said current House tax proposals would be lucky to draw 10 votes out of 100. The administration will use its own rosy growth forecasts rather than the Congressional Budget Office estimates on which lawmakers rely.”

 

While idealism and bluster are the order the day today, the thought of a signing ceremony in July (note to Steve: no such ceremonies in DC in August) seems far-fetched.

 

Pushback

It’s no surprise that the Trump administration has met some resistance to its unorthodox policy proposals from both the left and the right.  On the one hand, you have the Democrats who are opposed to slashing corporate tax cuts and top earning income brackets.  And on the other hand, you have Republicans, many of whom are opposed to Trump’s border tax proposal, which is intended to implement a 20 percent tariff on imports, ultimately limiting free trade and increasing consumer prices.

 

How the administration is planning on negotiating all of these issues with members of congress in six months or so is a difficult question to answer.

 

Closing Thoughts

Given Congressional congestions, it is unlikely that Congress will be able to repeal and replace the ACA, confirm a Supreme Court justice with eight votes short of the 60 vote threshold, push the presidents infrastructure deal, and pass a major tax overhaul in under five months. How the administration is planning on negotiating all of these issues with members of congress in five months is a difficult question to answer.

There is a lot of debate around tax reform and strong opposition to the president’s unorthodox policies from both Democrats and Republicans. And as these debates take shape, it’s worth mentioning that there are major differences between the House of Representatives and the Senate, which will most likely come up with separate proposals.   Said one Senator:  “current House tax proposals would be lucky to draw 10 votes out of 100.”

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