Tax Issue Differs From Target of Bill He Supported: Mulvaney

By Jonathan Nicholson

President Donald Trump’s pick to head up his budget office told Democratic senators his failure to pay federal taxes for a family babysitter was different than the activity targeted by a bill he supported while in the South Carolina Legislature—the bill would have banned “recalcitrant tax cheats” from running for office.

In written answers to questions submitted by senators on the Senate Budget and Homeland Security committees, Rep. Mick Mulvaney (R-S.C.), nominated to be director of the Office of Management and Budget, said his decision to self-report the tax infraction and take steps to correct it distinguish him from the subjects of a bill he co-sponsored while serving in the state senate.

Mulvaney’s nomination cleared both committees Feb. 2 and a spokesman for Senate Majority Leader Mitch McConnell (R-Ky.) said a floor vote on his nomination was possible the week of Feb. 13-17.

Sen. Kamala Harris (D-Calif.) on the Homeland Security panel submitted a question asking Mulvaney if he believed he met his own standard on paying taxes and holding office, given the late payment of taxes for a babysitter Mulvaney and his wife first employed about 16 years ago.

“I do. The bills you reference were designed to encourage those seeking public office (via election or appointment) to bring their taxes into compliance with the law and to discourage recalcitrant tax cheats from taking positions with government. I do not believe that my circumstance, while admittedly a clear error on my part, falls into the same category,” Mulvaney wrote.

His response was part of package of written answers to Democratic senators’ inquiries obtained by Bloomberg BNA.

“I have filed my taxes in a timely manner my entire life. As to the error on the household employee, I self-reported the mistake as soon as I became aware of it, informed the incoming Administration, this committee, and the IRS, and took immediate steps to redress the nonpayment of tax,” he wrote.

10-Year Prohibition

According to legislative records, Mulvaney was one of 14 co-sponsors of a 2009 S.C. bill, S. 737, that prohibited a person from appearing on a ballot as a candidate for a state office, or its political subdivisions, unless they had “annually filed all required federal and state income tax returns, regardless of the source of income, paid all income taxes due during that time period, and satisfied all judgments, liens, or other penalties for failure to pay income taxes when due” for the past 10 years. A similar bill set the same requirement for appointed state offices.

In response to a similar question from Sen. Bernie Sander (I-Vt.), the ranking member on the Senate Budget Committee, Mulvaney wrote: “I hope that you and your colleagues confirm me for the OMB director because 1) I am qualified for the position, 2) the President has indicated an express desire to have me in his cabinet and 3) as to the taxes, I immediately self-reported the mistake when I learned of it, and have taken appropriate action to redress nonpayment of tax as soon as the issue came to light.”

Mulvaney has said he failed to pay federal payroll taxes for a nanny who he said worked 40-hour weeks to help him and his wife care for their triplets through the age of four. Mulvaney said he considered the employee a babysitter, and did not regard her as a household employee. In response to Harris, Mulvaney said he has paid about $15,000 to clear up the delinquency but was still awaiting the calculation of late fees, penalties and interest.

‘Trajectory to Balance.’

In other responses, Mulvaney declined to say whether the Trump administration would send to Capitol Hill a budget that would be in a balance and reiterated his position that using the Overseas Contingency Operations fund, originally intended as a temporary way to fund the war in Iraq and Afghanistan, for day-to-day Pentagon operations was inappropriate.In response to question from Sen. Jeff Merkley (D-Ore.), Mulvaney said, “If confirmed, I will strive as Director to present to the Congress a credible Budget that includes specific tax and spending policies that put the budget on a path to balance.” He told Sen. Heidi Heitkamp (D-N.D.) his immediate priorities as OMB director would be working on a fiscal 2018 budget blueprint and filling empty OMB personnel slots.

Longer term, Mulvaney said his goals included “moving the budget on a trajectory toward balance,” making federal procurement more efficient, and balancing cost-benefit analyses and “non-quantitative data” in federal regulations.

“As to how to measure those longer-term goals, the first two should be relatively simple to measure, as they are almost purely quantitative in nature. For example: either our budget will balance sooner than the CBO baseline, or later; procurement savings and waste reduction can be similarly measured,” Mulvaney wrote.

Many budget experts have said it will be extremely difficult for the White House or congressional Republicans to boost defense funding, overhaul the tax system and boost infrastructure spending while still achieving a balanced budget in 10 years, at least without significant cuts to politically popular entitlement programs.

Mulvaney said he would advise the president on trade-offs with defense funding but said it was wrong to use the OCO fund to evade annual caps on defense spending. “My intent would be to advise the President on the costs and benefits of his strategic choices, and to then advocate for the funding our Armed Forces need in order to carry out the President’s direction,” Mulvaney wrote in response to a question from Sen. Ron Wyden (D-Ore.).

“I agree that it is inappropriate to use OCO to circumvent the Budget Control Act caps. I plan to consult with the Secretary of Defense on any plans to responsibly move enduring OCO funding into the base budget while avoiding negative impacts to ongoing operations, defense readiness, and acquisition programs,” he said.

To contact the reporter on this story: Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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