For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
Steven Mnuchin will lead the Trump administration’s tax overhaul efforts, he said at his nomination hearing for Treasury secretary, touching on tax policy changes he would make.
Among them are lower tax rates, particularly for corporations and passthrough businesses, Mnuchin told Senate Finance Committee members Jan. 19.
He also called for halting inversion deals in which U.S. companies reincorporate overseas, and said reducing rates would go a long way to stopping them.
“I think it absolutely has a huge impact on stopping inversions,” Mnuchin said. “I think there’s some other things that we may be able to do. But I think the biggest issue that creates inversions is the incentive for much lower taxes abroad than we have here.”
President-elect Donald Trump believes that U.S. companies have $3 trillion to $4 trillion in foreign profits sitting overseas, Mnuchin said. Repatriation would force a large share of that income into the U.S., he said.
“We’re going to get a lot of money back,” Mnuchin said.
The repatriation figure is commonly estimated at about $2 trillion.
The overall tax revamp effort shouldn’t result in more red ink for the federal budget when factoring in economic growth estimates through dynamic scoring, Mnuchin said, though he said a dynamic estimate of tax ideas from Trump’s campaign would lose about $2 trillion.
He said the incoming administration is targeting economic growth of between 3 percent and 4 percent.
The president-elect considers his border tax idea as specific only to domestic companies moving jobs abroad, Mnuchin told Senate Finance Committee ranking member Ron Wyden (D-Ore.).
“He has not suggested in any way an across-the-board, 35 percent border tax,” Mnuchin said. “If anything, quite the contrary.”
But Trump has concerns about certain prices rising for consumers, such as an increase in gas costs, Mnuchin said.
Mnuchin also said he would consider dropping proposed regulations related to valuing estates, pledged to examine offshore tax avoidance and suggested the Internal Revenue Service might need more personnel to more efficiently collect revenue. He declined to weigh in on potential changes to the earned income tax credit but called for bipartisanship as part of the process going forward when pressed by Wyden to discuss bills to expand the credit.
“I don’t want to comment on specific legislation on tax,” Mnuchin said. “I think that tax reform needs to be looked at as an overall policy and I’ve laid out a certain framework for what I believe the president-elect believes in.”
Non-corporate businesses would follow a simple, non-bureaucratic process to opt into their lower tax rate, Mnuchin said.
In short, he said, he was committed to ensuring that small businesses are treated fairly and get the benefit of any changes to the business tax.
“You check the box, you get the business tax,” Mnuchin said. “You leave the money in the company. You grow your company. You get the lower business tax. If you distribute it out, you pay dividends.”
Lower tax rates overall represent Trump’s central solution to improving economic growth and increasing jobs in the U.S., Mnuchin said.
The passthrough option wouldn’t be gamed, he said, adding that he wanted to ensure that hedge fudge managers don’t use passthroughs to avoid higher personal income taxes.
“We’ll make sure we work with Congress to make sure that we close loopholes so rich people don’t use this as a way to get lower business tax,” Mnuchin said.
He also pledged to strengthen whistle-blower protections at the IRS and said he would ensure the agency wouldn’t target taxpayers for their political beliefs.
Mnuchin pushed back on assertions by Wyden, who said the nominee dodged U.S. taxes by running hedge funds set up in the Cayman Islands and Anguilla, places with zero percent tax rates.
The offshore entities were set up there to accommodate investors such as nonprofit foundations, pension funds and a small number of foreign investors, Mnuchin said, adding that he paid all his taxes as required.
Wyden’s opening remarks on the topic prompted criticism from Sen. Pat Roberts (R-Kan.), who offered Wyden the anti-anxiety drug Valium. That triggered a testy exchange. Roberts said he was trying to lighten the mood and then left, after which Mnuchin began his opening remarks.
Wyden said the wealthy shouldn’t get tax cuts under what he called the “Mnuchin rule,” a reference to a comment Mnuchin made in a CNBC interview in November, where he said Trump’s plans wouldn’t provide absolute tax cuts for the upper class.
The senator also alleged tax abuses by Mnuchin through a foundation and trusts. In addition, Wyden and other Democrats on the panel criticized Mnuchin for failing to disclose $100 million in property assets and past management positions until the day before the hearing, as did Senate Minority Leader Charles E. Schumer (D-N.Y.).
Separately, at a press conference held at the same time as the hearing, Schumer said Mnuchin tried to hide his Cayman Islands holdings.
Schumer stood next to photographs of some Trump cabinet nominees, including a photo of Mnuchin labeled “Foreclosure King”—referring to his role as owner of OneWest Bank, a mortgage lender accused of unfair loan practices, a topic that Democrats hit on throughout the hearing.
Criticism of the nominee also came from across the aisle when Sen. Dean Heller (R-Nev.), expressed displeasure with Mnuchin’s lack of information on foreclosures in Nevada.
Finance Committee Chairman Orrin G. Hatch (R-Utah) decried Democrats’ opposition to all Trump nominees. Hatch called Mnuchin qualified and said allegations against Mnuchin lack credibility. He also reminded Democrats of offshore tax allegations raised about some of President Barack Obama’s nominees.
A committee vote on his confirmation won’t happen until after Mnuchin finishes questions for the record, which members of the panel haven’t yet completed. Should he clear the committee vote, Mnuchin’s nomination would then go to the Senate floor.
Only a couple of Trump’s nominees are scheduled for Senate votes after the inauguration on Jan. 20, in contrast to seven nominees who received Senate approval right after President Obama was sworn into office eight years ago.
With assistance from Kaustuv Basu in Washington.
To contact the reporter on this story: Aaron E. Lorenzo in Washington at email@example.com
To contact the editor responsible for this story: Meg Shreve at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)