Trump Officials Offer Differing Views on Tax Plan -- Update
May 25 2017 - 6:52PM
Dow Jones News
By Kate Davidson and Richard Rubin
WASHINGTON -- Senior Trump administration officials split with
each other publicly Thursday on a core feature of the president's
tax plan.
White House budget director Mick Mulvaney told a Senate
committee that the administration's tax plan doesn't bank on any
revenue stemming from faster economic growth. Four floors below
that hearing, Treasury Secretary Steven Mnuchin gave a
contradictory answer to a different Senate panel, insisting that
the administration's tax plan will partly pay for itself with
economic growth.
The open contradiction between two top economic advisers to
President Donald Trump showed just how unsettled their tax agenda
is, even as Republicans say they'll be able to complete a historic
revamp of the U.S. tax system by the end of 2017.
And the apparent disagreement isn't academic; it is central to
the administration's fiscal policy. The Trump administration's
simultaneous promises of a balanced budget, economy-boosting tax
cuts and accurate accounting are proving difficult to reconcile
with each other.
"It just defies understanding," said Sen. Claire McCaskill (D.,
Mo.)
Thursday's statements from Messrs. Mulvaney and Mnuchin mean
that the administration is proposing either a revenue-neutral tax
plan in a major departure from its previous approach or that the
president's proposed budget wouldn't balance after 10 years as
claimed.
Here's the discrepancy:
According to Mr. Mulvaney, the Trump administration's budget
assumes that its tax plan will pay for itself without factoring in
greater revenues from the faster growth it would generate. That
means the tax overhaul would include enough policy changes to
offset the loss of revenue that would come from lowering tax rates
-- resulting in no net increase or decrease in revenue, making it
"revenue neutral." That would be a sudden and significant shift
from the "huge tax cuts" that Mr. Trump has promised, and the
administration hasn't identified enough tax increases to make it
work.
In Mr. Mulvaney's telling, any revenue the plan generates via
faster economic growth would be over and above the tax policy
changes used to finance lower tax rates. That growth revenue would
be part of the $2.1 trillion the administration says helps balance
the budget after 10 years. Republicans on Capitol Hill have praised
the president all week for proposing a balanced budget.
Mr. Mulvaney insisted, in an appearance at the Senate Budget
Committee, that the administration wasn't double counting any
benefits from economic growth.
"You do recognize that if you count the growth here in the
budget, and then you count it again in your tax proposal, that is a
double counting, " Sen. Sheldon Whitehouse (D., R.I.) asked.
Mr. Mulvaney agreed and said the administration doesn't count
increased revenue from economic growth as part of its tax plan.
That fended off the "double counting" accusations that Democrats
and budget analysts leveled at the Trump plan this week, but it
opened up an apparent inconsistency.
At a separate hearing occurring at the same time, Mr. Mnuchin
said the administration will release a tax plan that will count
partly on revenue from economic growth spurred by tax cuts and
partly on revenue from limiting deductions and other tax
breaks.
That is consistent with the tax plan Mr. Trump proposed during
the campaign and the statements that Mr. Mnuchin and others have
made this year. They have long said that the administration wanted
a net tax cut and that growth caused by the tax cut and by other
Trump policies would cover the cost of the tax plan.
But doing it that way is the opposite of what Mr. Mulvaney said
and would use up some of the money that makes the budget
balance.
Mr. Mnuchin told the Senate Finance Committee that it was too
soon to know the details of any tax plan.
"It would be paid for with economic growth and base broadening,"
he said. "When we come out with all the details, there will be full
transparency."
In the one-page tax-plan outline released in April, the
administration proposed deep cuts in tax rates, including
reductions in the top rates on businesses and individuals. Mr.
Trump also said he would repeal the estate tax and the alternative
minimum tax.
"The one pager puts forward numbers that do not come close to
adding up, " said Sen. Ron Wyden (D., Ore.) "The math behind this
plan would make Bernie Madoff blush," he said, referring to the
former financier who confessed to orchestrating the biggest Ponzi
scheme in history.
Write to Kate Davidson at kate.davidson@wsj.com and Richard
Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
May 25, 2017 18:37 ET (22:37 GMT)
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