Trump Team Pushes Back Against `Tax Cuts for Wealthy' Critics
(Bloomberg) -- Treasury Secretary Steven Mnuchin and other top White House officials pushed back against assessments that the Trump administration’s planned tax benefits will go mostly to the wealthy.
“It is our objective that the entire middle class does get a tax cut,” Mnuchin said on ABC’s “This Week,” one of two interviews on Sunday news programs.
Mick Mulvaney, President Donald Trump’s budget director, and White House economic adviser Gary Cohn also defended the tax-cut plan, rejecting studies outlining its skew toward top earners.
Mnuchin said changes to the tax system being developed with Congressional Republicans “are meant to create middle-income tax cuts and also to make corporate and business tax competitive so we can bring back tons and tons of jobs and capital to this country.”
“We hope to get something on his desk and signed in December,” Mnuchin said, referring to Trump.
The White House and Republican leaders on Wednesday launched an urgent effort to get a major legislative win this year, announcing a long-awaited tax plan that immediately set off a fight over how much top earners should pay.
A study by the Tax Policy Center in Washington released Friday estimated that over several years, taxes would go up for almost 30 percent of individuals with incomes between $50,000 and $150,000. It also said that more than half the benefits provided by the plan’s tax cuts would go to the top 1 percent of taxpayers.
‘One Trillion Dollars’
Mnuchin and Mulvaney said critics making estimates didn’t yet have all the details of the plan.
“There are folks who are vested or have a vested interest in saying it’s going to be a giveaway to the rich or that it’s a bad plan,” Mulvaney said on CNN’s “State of the Union.” “The bill is not finished yet. It is impossible to sit down and say, ‘This will be the impact on this wage earner or this family at this particular time.’”
Mnuchin repeated a comment made on Thursday that with additional revenue from higher economic growth the administration expects the tax cuts will create, the plan would cut the government’s deficit by $1 trillion. The administration “fundamentally believes we can get back to a sustained 3 percent or higher” rate of growth, he said.
His deficit forecast is at odds with a Bloomberg survey in which 21 of 26 economists predicted that the tax plan, if enacted, would widen the budget deficit over the next 10 years.
Separately, the Committee for a Responsible Federal Budget said the plan could add$2.2 trillion to the deficit through 2027. “We estimate the plan calls for roughly $5.8 trillion of tax cuts and $3.6 trillion of base broadening, resulting in about $2.2 trillion of net tax cuts,” the budget watchdog group said in a Sept. 27 report.
House Speaker Paul Ryan, speaking on CBS’s “Face the Nation,” also declared the tax plan to be deficit neutral by raising potential growth. “Faster economic growth helps raise the economy, which raises revenues,” he said. “And that helps us tackle the deficit.”
Many economists have called the 3 percent growth target unreasonable given structural conditions in the U.S. economy, including an aging population and efforts to curb the number of immigrants. Federal Reserve Chair Janet Yellen told lawmakers in July it would be “challenging” to reach that level of growth.
Mnuchin also responded to concerns that a new lower rate for so-called pass-through businesses would provide a huge loophole for wealthy Americans.
“As we change the pass-through rates, it’s important that we have guard rails around those rules,” he said. “This isn’t about creating tax cuts for the rich.”
Pass-through vehicles, often used by people who work as independent contractors, are companies that don’t pay tax. Instead, their owners, after deducting business expenses, receive any leftover profits and pay at regular personal-income rates.
Under the new rules, pass-through companies would pay a maximum 25 percent tax on profits, much lower than the upper brackets in the Trump plan. That has provoked fears that many richer Americans will try to set up pass-through entities to reduce their tax exposure.
Cohn, on Fox News Channel’s “Sunday Morning Futures,” said the administration will make sure people can’t game the system. “There will be quite extensive anti-abuse language in the pass-through definition,’’ he said.
While the administration prefers not to have a new, higher tax bracket added for the wealthiest Americans, it has given the tax writers in Congress the latitude to add one if needed “to make sure that the tax budget works,” he said.
Cohn conceded that because the top wage-earners pay a bulk of U.S. income taxes, the plan won’t really cut taxes unless the wealthy benefit. But he said the aim is to deliver tax relief to the middle class, and that the tax writers will decide what income levels to set for the tax brackets to ensure that happens.