Treasury Secretary Steven Mnuchin said Sunday the Trump administration still aims to pass tax reform legislation this year and its focus is on cutting taxes for middle-class Americans and businesses rather than the wealthy.
“We’re absolutely committed to getting tax reform done this year,” Mnuchin said on ABC’s This Week With George Stephanopoulos. “It’s critical for economic growth. We need to get back to 3% or better GDP.”
He said the White House intends to release the plan by early September “with being able to vote and getting it passed by the end of the year.”
Mnuchin said the blueprint hasn’t changed since he and National Economic Director Gary Cohn in April unveiled a proposal to streamline the current seven tax brackets to three — 10%, 25% and 35% — with the top rate falling from 39.6%. Officials have not said which income ranges would apply to those brackets.
Mnuchin dismissed recent speculation that White House advisor Steve Bannon is supporting a 40% tax rate for the wealthiest Americans.
“It’s another example of a false leak that’s been reported,” he said. “It’s not on the table.”
Many analysts recently have predicted tax reform will be pushed back to early next year and the extent of the cuts will be scaled back in light of snarls in Congress. For example, revenue to offset the reductions depends on passage of Republicans’ proposed replacement of the Affordable Care Act. The substance of that bill and its chances of approval remain in question.
Senate Republicans also have balked at a proposed border adjustment tax that could offset the revenue losses from tax reform.
Last month, Goldman Sachs said in a note to clients that it expects tax legislation by early next year but the changes would lift economic growth by only three-tenths of a percentage point in 2018. The economy has grown an average 2% a year since the recession ended in 2009. Mnuchin has said lower taxes could boost growth to at least 3%.
The Tax Policy Center has said the White House’s current proposal would mostly benefit wealthy Americans who tend to save rather than spend their tax savings. But Mnuchin said, President Trump’s “focus is on a middle-income tax cut” and “reforming the business tax system to make it competitive.”
He reiterated that reductions in federal revenue will be offset by eliminating deductions. Experts say scrapping the state and local tax deduction would especially hit high tax states, such as New York, Connecticut and California.
“We want to be sensitive to the states and those economies as we shape the plan,” Mnuchin said Sunday.
The prospect of significant cuts in taxes and regulations has underpinned soaring business confidence and the stock market market rally since the November election. In a letter late last month, top business groups urged congressional leaders to “move quickly to enact tax reform legislation,” calling it a “once in a generation opportunity to substantially improve America’s economy.”
But Goldman Sachs said, “Equity market indicators suggest little expectation of significant policy change at this point.”
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