Mnuchin Sells Tax Cut Coast-to-Coast as Public Doubts Mount
(Bloomberg) -- Treasury Secretary Steven Mnuchin is mounting a cross-country roadshow to persuade businesses and the Republican faithful to put their weight behind a proposed tax overhaul from the Trump administration that so far lacks broad public support.
His tour has included stops in California, New Jersey and Ohio to speak to mostly friendly audiences of companies that stand to benefit from the tax bill. On Tuesday he delivered his earnest, scripted case for the legislation to managers of Ohio retail companies, an industry that expects its taxes to be slashed under the plan.
“I appreciate your help with this,” said Jack Seibert, owner of a suburban Columbus jewelry store with six employees. He was the first of two pre-selected questioners, and asked the Treasury secretary about the impact on small business.
Yet outside those hand-picked groups, the Trump tax plan faces skepticism, if not outright opposition. About 52 percent of American voters disapprove of the proposals compared to 25 percent who favor them, while 59 percent say the bills favor the rich over the middle class, according to a nationwide Quinnipiac Poll taken Nov. 7-13 and published Wednesday.
The final product is a moving target, with the Senate tax-writing committee still working on its draft.
Republican Senator Ron Johnson of Wisconsin said Wednesday he would vote against the Senate’s tax plan as it’s currently written, and two other Republican senators, Susan Collins of Maine and Lisa Murkowski of Alaska, voiced reservations about parts of it. Republicans can’t lose more than two of their own votes in the Senate, if all Democrats oppose the legislation.
The House, meanwhile, is scheduled to vote on its tax-overhaul bill Thursday. While it also provides deep rate cuts for corporations and many closely held businesses, the bill differs from the Senate plan in substantive ways. GOP leaders in both chambers will have to work out those differences before any tax-overhaul can become law. President Donald Trump is scheduled to go to the House on Thursday to rally Republican members before the vote, which is expected to take place after 1:30 p.m. New York time.
Mnuchin, a 54-year-old former private equity manager who is new to politics, is seeking to simultaneously mobilize natural constituencies for Congress’s rapidly evolving tax-overhaul effort and confront damaging perceptions that its benefits largely won’t accrue to the middle class. He’s visited both red and blue states -- New Jersey, Ohio and California -- but his audiences have been friendly.
“For a family making about $75,000 for a family of four, that will be over a $1,000 tax cut, which is quite significant,” Mnuchin said in Ohio, where the median income is just over $50,000.
Left unsaid: Congress’s official scorekeeper for tax legislation found last week that the Senate plan -- at the time -- would have meant an average tax cut of $58,000 for households earning $1 million or more a year. The plan has been revised since, to provide more middle-class benefits upfront, but then wipe those changes off the books after 2026.
“The corporate cut, we expect, will be passed on in terms of wages and growth” and ultimately help middle-class consumers, who since the recovery has not seen a bump in their paycheck, Mnuchin said.
Economists disagree about how much a corporate tax cut would spur wage growth. But Mnuchin points out that while the recovery from the financial crisis has been great for rich people, many other Americans have seen their incomes stagnate.
The data backs that up. Weekly earnings for full-time wage and salary workers in the lower-rungs of the earnings distribution have been crawling along since the 2007-09 downturn, even while the top 10 percent of earners saw their pay slowly pick up.
Mnuchin, whose use of military aircraft for travel stirred controversy earlier this year, is sticking to commercial flights on this speaking tour. Everywhere he travels, often with chief of staff Eli Miller by his side, he promises businesses and voters that the president will sign legislation that will boost growth and reduce their tax forms to the size of a postcard in December.
In Columbus, Mnuchin spoke to retailers, such as L Brands, Big Lots and Abercrombie & Fitch who all have headquarters in central Ohio. The retail industry is celebrating Trump’s pledge to cut corporate taxes, albeit nervously in fear that it gets delayed or doesn’t happen.
“Anything that delays that or creates any uncertainty about what might happen in the future or puts it at risk is very problematic in terms of getting all the benefits that we want from all the effort,” said Matthew Shay, head of the National Retail Federation.
For that reason, Mnuchin said, what’s not up for debate is whether relief for corporations will be permanent, particularly provisions that would move the U.S. code toward a so-called territorial system that would focus on corporations’ domestic economic activity.
“What’s absolutely critical is that when you go from a worldwide system to a territorial system, that conversion is permanent,” he told Bloomberg News. “You can’t go back and say that at the end of 10 years, we’re going to go back to a worldwide system.”
Missing from the audience in Columbus, and later during a business round table, were international automakers, a keystone to the local economy with operations in nine other states across the U.S., including Texas and California. While the group supports the broader concept of new tax legislation, it is less sanguine about Trump’s tax plan.
“We have been concerned with some of the provisions designed to address base erosion,” said John Bozzella, CEO of Global Automakers, whose members include Honda and Toyota. The group is working with both houses of Congress to change provisions that it thinks targets international carmakers, creating an uneven playing field.
Earlier in the week, Mnuchin spoke to a group of 100 people invited by the White House in a fire hall in Bayville, New Jersey. He and Ivanka Trump, the president’s daughter and an adviser, extolled the benefits of the tax package in a county where all but one of 33 towns chose Trump over Democrat Hillary Clinton last year by a margin of 2-to-1.
It is, however, a state where some people would be particularly hard-hit by one provision: A repeal of some, if not all, federal deductions for individuals’ state and local taxes.
Small Business Focus
On his tour, Mnuchin is reaching out to small-business owners. Seibert, the jewelry store owner who questioned the Treasury secretary in Columbus, said afterward he was satisfied with the secretary’s pitch that small- to medium-size companies would benefit.
Seibert said he would welcome being able to immediately expense purchases of tools and supplies, and he’s banking on tax simplification because it now costs him about $2,000 to have his taxes prepared.
“If it’s a post card-sized tax return, I would welcome that -- as I think would any small business owner and any American,” Seibert said.
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