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President Donald Trump is under pressure to deliver on his tax reform promise and, if the health care bill debacle is any indication, finding someone with Hill experience to fill the Treasury assistant secretary for tax policy position is more important than ever.
The administration’s efforts to repeal the Affordable Care Act showed that tax reform can’t be done quickly, said Gregory F. Jenner, who served as both acting assistant secretary for tax policy and deputy assistant secretary for tax policy during the George W. Bush administration. “That is delusional,” he said, noting that it takes time for the legislative process to be effective.
“So somebody who knows that, understands that and has at least the ability to say to the higher-ups in the Treasury Department and the White House, ‘Slow down. Let’s get this right,’ I think that’s very, very important,” said Jenner, a partner at Stoel Rives LLP.
David Kautter and Tony Coughlan—two people being considered for the role, according to Politico Pro—have the requisite Hill experience. Kautter, former managing director of American University’s Kogod Tax Center, served as legislative counsel to former Sen. John C. Danforth (R-Mo.). Coughlan currently serves as tax counsel for the Senate Finance Committee.
The White House told Bloomberg BNA March 28 that it had no personnel announcements to make at this time. Treasury, Kautter and Coughlan didn’t respond to requests for comment.
Knowledge of Senate rules and practices, which the two reported contenders possess, is particularly valuable because “as we know, the Senate is going to be a key player” in tax reform, said Eric Solomon, a principal in Ernst & Young LLP’s National Tax Department, who served as Treasury assistant secretary for tax policy from 2006 to 2009.
During the health care bill process, House Republicans faced challenges dealing with the constraints of the Senate’s budget reconciliation rules. Reconciliation is a fast-track process that would allow Republicans to avoid a filibuster in the Senate, but the process can only be used if all changes in the proposed legislation have a direct impact on the federal budget.
Mark Mazur, who served as assistant secretary for tax policy under President Barack Obama, is less convinced that Hill experience is a must for candidates. It’s “helpful but not necessary,” he said. Having the full trust of the Treasury secretary is the most important quality, he said.
Technical tax expertise, which both Kautter and Coughlan have, is also essential, said Lisa M. Zarlenga, a partner at Steptoe & Johnson LLP, who was Treasury tax legislative counsel in the Obama administration.
Kautter formerly served as EY’s director of National Tax. In addition to his position with the Senate Finance Committee, Coughlan previously worked as a tax director at Oracle Corp. and as a senior manager at PricewaterhouseCoopers LLP.
The people currently working on the government’s tax overhaul efforts—Treasury Secretary Steven Mnuchin; Gary Cohn, director of the National Economic Council; and Justin Muzinich, Mnuchin’s tax reform counselor—don’t have that type of technical tax experience, Zarlenga said.
White House press secretary Sean Spicer recently said that Trump and his administration would be “driving the train” on tax reform. And the president previously said he would release his own tax plan.
To do so, “he needs someone who understands the substantive tax law, where the pitfalls are and things that are going to need fixing in any proposal,” Zarlenga said.
“A lot of times the policymakers come up with this big picture idea,” she said. “And then it takes someone who’s a little more in the weeds to say, ‘OK if you want to do this, you also have to make sure you close this loophole or figure out a way to do this.’”
Jenner said working on tax reform is like playing “tax policy whack-a-mole.” Whenever a change is made to one policy area, there are consequences that arise in others, he said. Having the expertise to know when something would work in theory but be a disaster in practice is a must, Jenner said.
The Office of Tax Policy is a critical tool for any administration trying to achieve major tax changes, Solomon said. Filling the assistant secretary for tax policy position will help the Trump administration unlock the office’s resources—the economists and lawyers who have worked there for years.
Some of those economists and lawyers were mulling tax reform issues even before Obama took office, he said.
In 2005, the Office of Tax Policy assisted a bipartisan congressional panel with a report advising then-President Bush on options for reforming the tax code. In 2007, Treasury issued a U.S. competitiveness study on tax reform.
The Office of Tax Policy also worked with the Obama administration on its tax reform framework published in 2012 and updated in 2016.
“There are many people who are still there that were involved in those projects,” Solomon said. “Having a leader in that office to help bring those resources to bear to help assist the administration is very important.”
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