Trump’s budget tried to side-step taxes. Today’s Ways and Means hearing with Treasury Secretary Mnuchin should not.
Today, the House Committee on Ways and Means is holding a hearing on President Trump’s budget proposals, with Treasury Secretary Steven Mnuchin providing testimony.
In the past, Mnuchin has claimed that in the Trump administration’s tax plan, “there will be no absolute tax cut for the upper class.” This claim has been dubbed the “Mnuchin rule.” However, the Center on Budget and Policy Priorities has found that both the Trump campaign and House GOP “Better Way” tax plans flagrantly violate this rule. Tax Policy Center (TPC) estimated that 47 percent of the Trump campaign tax plan would go to the top 1 percent while 76 percent of the House GOP tax plan would go to the top 1 percent in their first years, and this regressivity just grows over time. And the scarce details from the administration on their tax plan have not deviated much from the campaign plan.
Despite this, yesterday at the 2017 Peter G. Peterson Fiscal Summit, Mnuchin again echoed (see 2:08 in the video) this claim, stating that “the president’s objective is to create a middle-income tax cut, it’s not to create tax cuts for the high-end.”
As we noted yesterday, Trump’s budget proposal looks like a disaster for economic growth. But another much-discussed detail is that the Trump administration appears to be trying to have their cake and eat it too on tax reform and growth. Trump’s budget proposal relies on two wholly unsupported assumptions: that growth will hit 3 percent consistently in the next decade, and that their tax plan will lose no revenue in “static” terms, which is to say, regardless of its impact on economic growth. These assumptions are needed to claim that even their large, cruel, and stupid spending cuts would balance the budget by fiscal year 2027.
A tax plan which lost no revenue in static terms while spurring a huge acceleration of growth would look nothing like the tax plans they’ve so far released. The TPC estimated that the Trump campaign plan would cost $6.2 trillion over the first decade in static revenue loss. Including the effects on debt service and economic growth, the tax plan would increase the debt by $7 trillion over the first decade. Previously, Secretary Mnuchin claimed that the tax cut would “pay for itself” by boosting growth. First, plenty of research demonstrates conclusively that it won’t pay for itself. And if their tax plan does not pay for itself in static terms, the administration is essentially making an egregious error in double-counting the tax cut’s contribution to growth that both pays for spending cuts and its own revenue losses. The administration’s response to the criticism that they have done no analysis to back up their claims appears to be that they were simply lazy. It’s not obvious how that’s better.
The Trump budget may have tried to ignore their own tax cut, but Secretary Mnuchin should not be able to at the hearing. He should be asked why the administration continues to claim that their objective is a middle-income tax cut, with no absolute tax cut for the upper class, while they continue to propose nothing but tax cuts tilted egregiously towards the rich.
Further, something really obvious should be pointed out. If your “intention” is to cut middle-class taxes, and not taxes for rich, it’s not that hard to figure out how to do this. After all, Mnuchin has told us again and again that there are “100 people working on this plan.” Surely some of them knows how to not cut taxes for the rich? Ignoring the merits of such a policy, a middle-class tax cut is not exactly rocket science to create.