Treasury Watchdog Finds No Political Interference in Tax-Bill Analysis

Career Treasury Department staffers were "fully engaged" in the process of analyzing a Republican tax bill last year, and denied that political appointees had taken over the process, according to a government watchdog inquiry.

The department's inspector general launched the probe last year into whether top political officials interfered with or mischaracterized the work of Treasury's tax-policy analysts as the administration sought to garner support for a sweeping rewrite of the tax code.

Sen. Elizabeth Warren (D., Mass.) asked the inspector general to investigate whether Treasury staffers had in fact analyzed the potential economic effects of the tax bill, whether these analyses used standard department protocol and why they weren't released to the public.

"We found nothing to indicate that the process employed by Treasury this past year was contrary to law, an abuse of authority or otherwise improper," Treasury Inspector General Eric Thorson said in a letter to lawmakers this week summarizing the findings.

Two career staffers at Treasury's Office of Tax Analysis indicated the office's work was largely similar to the work conducted in the last administration, according to an internal inspector general memo viewed by The Wall Street Journal. The men -- James Mackie, the director of the Office of Tax Policy, and Thomas West, Treasury's tax legislative counsel -- also disputed the notion that career staffers were shut out of the process of reviewing the tax bill.

The New York Times first reported on the inspector general's findings Thursday.

Messrs. Mackie and West said career staffers were engaged in providing analyses of various legislative proposals and reviewing "outside inputs, " such as assumptions about economic growth, that would affect estimates of the bill's potential impact, according to the memo.

Administration officials, including Treasury Secretary Steven Mnuchin, repeatedly claimed the bill would generate enough economic growth to offset lost revenue from tax cuts and wouldn't add to the federal budget deficit. But Treasury has never released a formal analysis of the bill's macroeconomic effects; rather, the officials assumed the economy would grow faster and calculated the fiscal impact of those growth rates.

Speaking at a White House briefing Thursday, Mr. Mnuchin used the report to push back against criticism that the tax bill won't benefit the economy as much as the GOP claims it will.

"The IG just came out with a report that made very clear there was no political interference in this, in how we ran these numbers," he said. "I would hope the Democrats are focused on doing things that are good for the economy and the American people."

The Joint Committee on Taxation said that gross domestic product would be 0.1% to 0.2% larger by 2027 thanks to the tax overhaul, which includes $1.5 trillion in tax cuts and is expected to add about $1 trillion to the deficit.

JCT said the law's growth effects would be larger initially and then fade over time, unless certain provisions that expire are instead extended as many of the law's proponents hope.

The inspector general also said officials "perceived no 'political' or improper purpose" in the decision to remove a 2012 paper on corporate tax rates from the Treasury website that contradicted Mr. Mnuchin's argument that workers would benefit the most from cuts in the rates.

(END) Dow Jones Newswires

January 11, 2018 18:44 ET (23:44 GMT)