WASHINGTON – Treasury Secretary Steven Mnuchin said Friday that some parts of a Republican plan to overhaul the tax code could be permanent while others would be temporary.
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Mr. Mnuchin, speaking at a conference of international bankers, also said he expects Congress can have a bill to the president's desk by the beginning of December, an aggressive timeline.
"There's tax cuts that absolutely have to be permanent," he said when asked whether the administration will be able to make tax cuts permanent. For example, moving to a territorial tax system, which would allow companies to repatriate their future foreign profits without paying U.S. taxes, would be very difficult to unwind, he said.
On the other hand, the current GOP proposal includes a provision that would allow businesses to immediately write off investments for at least five years with little certainty beyond that.
"That's to incent people to invest money now and it's a lot cheaper than giving it to them for 10 years," Mr. Mnuchin said.
That is cheaper for the federal budget in the short run, but would do much less to improve the economy, according to the conservative-leaning Tax Foundation. In an analysis earlier this month, the group estimated that temporary investment writeoffs would lead to less than one-quarter of the economic growth of the full and permanent provision that House Republicans had proposed last year.
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The size of tax cuts, and the extent to which they are made permanent, will be constrained by Senate rules that limit the ability of Republicans to increase budget deficits. Those rules apply under the fast-track procedure that will let the GOP pass a tax plan without any Democratic votes.
The party faces the challenge of fitting its tax goals -- more than $5 trillion of rate cuts over a decade -- into a budget plan that will likely allow for $1.5 trillion in bigger deficits over a decade and no additional deficits beyond that 10-year window. Doing so would require eliminating or shrinking some cherished tax breaks and could force the GOP to make some tax breaks temporary, even if they plan on coming back later to extend them.
In 2001 and 2003 under President George W. Bush, Congress cut individual taxes and set a 2010 sunset date. Most of those cuts were extended permanently in 2013 by large bipartisan majorities and President Barack Obama.
That would be tougher to do this time around, because Republicans want to make business tax cuts permanent up front, to provide companies with certainty for decision-making.
A combination of permanent business tax cuts with temporary individual changes could be hard to sell to lawmakers and to voters. Republicans will likely consider pairing a permanent territorial tax system for businesses with a permanently higher standard deduction or child tax credit for individuals, said Rohit Kumar, a leader of PwC's Washington National Tax Services.
"You want, at least, to have something of similar quality be made permanent on the individual side," said Mr. Kumar, a former aide to Senate Majority Leader Mitch McConnell (R., Ky.)
Mr. Mnuchin and other Trump administration officials have maintained the plan will generate enough economic growth to offset the costs of tax cuts, and may even reduce the deficit, a claim some tax analysts have said is very unlikely. Congressional Republicans' schedule isn't quite as aggressive as Mr. Mnuchin's. The Senate is set to adopt its budget as soon as next week. Then, the House and Senate must agree on a budget.
After that, the House Ways and Means Committee plans to release a detailed bill. House Speaker Paul Ryan (R., Wis.) said this week that he hopes the House will vote on a tax bill in November and said he would keep lawmakers in Washington until Christmas, if needed, to work through a final version with the Senate.
Republican Sens. David Perdue of Georgia and Tim Scott of South Carolina told major donors, including billionaire David Koch, on Friday in New York that the effort to overhaul the tax code is proving slower than expected. The donors are part of a network of political and policy groups steered by the Koch brothers.
"I'm very concerned," Mr. Perdue said about the ability to complete a tax bill on a timeline that has already slipped from November to December. "We have a ways to go yet, mainly on deductions. And mainly on the individual side."
Both acknowledged the efforts are concentrated on swaying "three or four" Senate Republicans and then reconciling the Senate and House plans.
"Believing that we're going to get this done by Thanksgiving is unrealistic," Mr. Scott said. "By the time we get this issue, we'll probably be bleeding into middle of December, and we're going to use the backstop of Christmas, end of the year, to finish the process."
--Julie Bykowicz contributed to this article.
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(END) Dow Jones Newswires
October 13, 2017 12:47 ET (16:47 GMT)