WASHINGTON: President Donald Trump promised on Friday that he would unveil a “massive” tax cut for Americans next week, vowing a “big announcement on Wednesday”, but he revealed no details about what is certain to be an enormously complicated effort to overhaul the nation’s tax code.
Trump offered his tax tease in an interview and again during remarks at the Treasury Department on Friday afternoon as he raced to stack up legislative accomplishments before his 100th day in office at the end of next week.
His announcement surprised Capitol Hill and left Trump’s own Treasury officials speechless as he arrived at the Treasury offices to sign directives to roll back Obama-era tax rules and financial regulations. Earlier in the day, when reporters asked Steven Mnuchin, the Treasury secretary, how far away a tax overhaul proposal was, he said he could not give an answer. “Tax reform is way too complicated,” he said.
Trump told The Associated Press in the interview that his tax reductions would be “bigger, I believe, than any tax cut ever”. But he faces an enormous fight among clashing vested interests as Congress tries to rewrite the tax code.
Starting that fight next week is further complicated by Trump’s hopes to revive the Republican health care plan that collapsed last month. And it would mean trying a tax overhaul as his White House faces the prospect of a government shutdown if lawmakers cannot agree on a funding bill by April 28.
The details of Trump’s tax plans remain the subject of intense speculation, with stock markets regularly gyrating when White House officials discuss the subject. Since taking office, the president has suggested that he wants to enact the deepest cuts to individual and corporate tax rates in history.
But despite Trump’s statement on Friday that his tax overhaul “really formally begins on Wednesday”, White House officials quickly cautioned against high expectations that Trump would provide the legislative text of a detailed tax plan next week.
Instead, a senior administration official said the president would release only the “parameters” that Trump expected a tax plan to follow in the long congressional debate that would surely follow. Another official said the information released next week would be more like a “broad” outline. Wall Street, which tends to celebrate tax cuts, barely reacted; the Standard & Poor’s 500-stock index was down 0.3 per cent on Friday.
The administration has maintained that middle-income tax cuts, a simplification of personal income taxes, and making business taxes more competitive with other countries are the top priorities. Trump insisted that his plans were on track and that his strategy to remake the economy would change history.
“This is really the beginning of a whole new way of life that this country hasn’t seen in many, many years,” Trump said as he sat at the desk of Mnuchin, near a portrait of Alexander Hamilton, the first Treasury secretary.
He said, “We’ve lifted one terrible regulation after another at a record clip from the energy sector to the auto sector.”
Despite Trump’s enthusiasm, the directives he signed at the Treasury Department on Friday to review measures put in place by the Obama administration were largely preliminary. As business groups cheered the moves, some sceptics were left questioning whether Trump was keeping his campaign promises to give working-class Americans a higher priority than Wall Street bankers.
“From our perspective, it is a direction that is dramatically backwards on financial stability,” said Lisa Donner, executive director of Americans for Financial Reform.
The presidential order asks Mnuchin to review the tax regulations imposed by President Barack Obama in 2016. Those include efforts to clamp down on “corporate inversions” — in which US companies merge with foreign companies to take advantage of lower tax rates abroad.
Viewed alone, undoing the rules would appear to be at odds with Trump’s campaign pledge to reduce incentives for companies to move overseas to minimise taxes.
Robert Willens, an independent tax consultant, said reversing these rules would be a gift to Wall Street bankers and lawyers who have complained that they have hampered international deal making.
“They’ll be dancing in the streets and jumping for joy,” Willens said.
Memorandums to the executive order ask Mnuchin to review the Orderly Liquidation Authority, a tool created by the Dodd-Frank law of 2010 for unwinding financial institutions that are on the verge of collapse. Many banks have hoped that Congress will repeal the system. The administration is examining whether it encourages excessive risk-taking or exposes taxpayers to potential liabilities.
Treasury is also reviewing the Financial Stability Oversight Council, which designates financial institutions as “systemically important,” better known as “too big to fail.” It requires them to hold more capital in reserve in the event of financial emergencies.
Both provisions, which were part of the Dodd-Frank law, are delayed by a 180-day review by Treasury.
Senator Sherrod Brown, Democrat-Ohio, assailed Trump for trying to undermine rules that were put in place to protect the economy.
“Any actions to undermine these protections encourage Wall Street’s risky behaviour and leave taxpayers and our economy exposed to another catastrophe,” he said.
Brown said that Trump appeared to be breaking a campaign promise by making it easier for companies to use inversions.
“We should be working to lower taxes for hardworking families and workers across Ohio, not helping multimillion-dollar corporations cheat the system to avoid paying their fair share,” he said.
Mnuchin insisted that would not be the case and argued the tax overhaul legislation plan that they would propose will address the problem of companies moving overseas.
Trump has shown an affinity for tariffs. He proposed a “reciprocal” tax this month that matches the import taxes other countries impose on US goods.
It remains unclear if Trump is on board with the “border adjustment” tax that is central to the plan being promoted by House Speaker Paul Ryan of Wisconsin and House Republicans. The concept would allow Republicans to raise more than $1 trillion of revenue, making it possible for them pass legislation without adding to the deficit.
