White House Banks On Sweeping Tax Plan
By Peter Nicholas, Kate Davidson and Nick Timiraos
White House officials said Thursday they are developing a sweeping plan to overhaul both corporate and individual taxes, dismissing concerns that a more modest proposal might be more viable in today's political climate.
Speaking at a conference of international financial firms, Treasury Secretary Steven Mnuchin said the administration would release its tax overhaul "very soon."
The remarks ended weeks of mixed signals from the White House about the breadth of President Donald Trump's plan, and came as some of his former campaign advisers cautioned against an aggressive approach.
Four of Mr. Trump's 2016 advisers wrote an op-ed in the New York Times laying out a strategy that would focus on corporate and small-business taxes, while leaving for 2018 what they called the "maddeningly complex individual income tax system."
The authors of the op-ed included Stephen Moore, an economic adviser to Mr. Trump's campaign, and Arthur Laffer, a well-known adviser to President Ronald Reagan and also to the Trump campaign.
Sen. Tom Carper (D., Del.), a member of the Senate Finance Committee, also called for a focus on business taxes, saying in an interview: "Maybe we could try and take in bite-size pieces."
But Mr. Trump's top economic aides, Mr. Mnuchin and Gary Cohn, director of the National Economic Council, rejected that approach. Calling for an expansive plan, Mr. Mnuchin said that the Trump administration is determined to enact "the most significant change to the tax code since Reagan" -- a reference to the last comprehensive tax rewrite, passed in 1986.
A rewrite of the complex tax code is a goal that many business leaders have been pressing for years. The Dow Jones Industrial Average rose 43 points on Thursday while Mr. Mnuchin was speaking.
Mr. Cohn, speaking at the same conference, said he has been working closely with Mr. Mnuchin on a proposal that would tackle both individual and corporate parts of the tax code.
"We are going to come out with a unified, united tax proposal from the White House that will include individual as well as corporate," he said.
Trump administration officials have consistently rejected any talk of splitting a tax-code overhaul into smaller bills -- for example, by advancing changes to individual tax rates separately from corporate taxes.
In an interview last week, Trump budget director Mick Mulvaney said making changes to the corporate tax structure without addressing individuals would leave behind small businesses and other partnerships that don't file as corporations.
"There is a stronger argument for doing it all at one time, not just from a practical standpoint in terms of dealing with the substance of the issues, but also the politics," Mr. Mulvaney said.
Some analysts remain skeptical about the administration's ability to follow through.
Andy Laperriere, an analyst at Cornerstone Macro, said in a note to clients Thursday the firm was lowering its odds that a major tax bill would pass before congressional elections in November 2018, because he said the administration is understaffed, undisciplined and hasn't defined its basic governing philosophy.
"Three crucial months into his presidency, Trump has no plan," wrote Mr. Laperriere. He said the administration's unwillingness to abandon its unsuccessful health-care proposal has further left the tax revamp in limbo. Pushing health-care legislation means "congressional Republicans won't get to work in earnest on a tax bill anytime soon," he said.
No consensus has yet emerged about the full scope of a tax overhaul, and the administration officials didn't release the details of their plan.
Another unknown is whether and how the administration will propose to make any tax changes revenue-neutral, meaning that the tax code continues to bring in as much revenue as it does today.
Mr. Cohn indicated that would be a key goal of the administration, because it would unlock a procedural tool that allows legislation to pass with a 51-vote majority in the Senate without having tax changes expire after a decade.
But finding new revenue sources is politically difficult. Mr. Mnuchin hinted at a potential solution: He said the administration believed its tax cuts would largely pay for themselves, meaning they would rely on optimistic economic growth assumptions to show that tax and other policy changes would boost incomes and corporate profits, partially offsetting lost revenue from lower rates.
The House Ways and Means Committee is expected to hold a hearing next week when lawmakers return from recess. Some GOP leaders favor a border-adjustment measure that would raise about $1 trillion over a decade by taxing imports and removing taxes from U.S. exports.
White House officials aren't sold on the idea. Privately, they warn that a border adjustment provision would fail in the Senate. At the conference, Mr. Mnuchin said that such a tax, designed to help offset revenue losses from tax cuts, might push up the dollar and hurt exports. "We're concerned about the impact on currency," he said.
Complicating matters, the White House has at times sent conflicting messages about the tax rollout.
During the campaign, Mr. Trump pledged that he would work with Congress to introduce a tax bill and fight for its passage within the first 100 days, a milestone that comes on April 29.
On Feb. 9, at a White House meeting with airline industry executives, Mr. Trump said that "we're way ahead of schedule," and that "we'll be announcing something over I would say the next two or three weeks that will be phenomenal in terms of tax."
But his focus turned to the complicated work of stitching together the House majority needed to pass the health-care overhaul. When that push failed in March, Mr. Trump seemed eager to put the defeat behind him and turn toward passage of a tax plan.
"So now we're going to go for tax reform, which I've always liked," he told reporters in the Oval Office on March 24.
He later turned back to the health-care bill, saying that savings from a new health-care system could be plowed into his tax plan.
Just last week, in an interview with The Wall Street Journal, Mr. Trump said his overriding priority was passing the health-care overhaul. Asked if he would release guidelines for lawmakers about his tax proposal, Mr. Trump said: "No."
"I'm going to get health care done," he said.
At an appearance in Wisconsin on Tuesday, Mr. Trump's message changed again. He said he was committed to passing a health-care overhaul but added that "our tax reform and tax plan is coming along very well. It's going to be out very soon."
The rhetorical shifts have created "a lot of confusion," said Rep. Richard Neal (D., Mass.), the top Democrat on the House Ways and Means Committee.