Treasury Secretary Steve Mnuchin said Thursday that economic growth will pay for a “majority” of President Trump’s tax reform plan, acknowledging that eliminating loopholes and deductions will finance only a portion of the ambitious proposed overhaul of the nation’s tax code.
“The deal will pay for itself,” Mnuchin declared during a question-and-answer session at the Institute of International Finance’s Washington Policy Summit. The secretary added, however, that the administration “fundamentally believe[s] in dynamic scoring” and will judge the proposal’s impact on the deficit accordingly.
The Congressional Budget Office has, since a rule change in 2015, evaluated the cost of various proposals using two distinct methods: traditional scoring and dynamic scoring. The traditional scoring method looks only at the text of legislation to determine its impact on the deficit: the money a bill proposes to spend, and the methods the bill proposes to pay for it. The dynamic scoring method, by contrast, adds to that calculation an estimate of the bill’s impact on the broader economy.
Conservatives have long argued that the cost of tax cuts should be evaluated using dynamic scoring, rather than traditional scoring. They don’t believe tax cuts must be fully paid for in legislative text, arguing that the economic growth they create will outweigh any additional money the tax cuts add to the national debt.
Many progressives dispute that claim, saying that past tax cuts haven’t yielded the economic growth that dynamic-scoring proponents have promised. They believe dynamic scoring encourages fiscally irresponsible proposals that will blow up the deficit.
Mnuchin suggested on Wednesday that the administration is “pretty close” to unveiling its tax proposal, which he described as the “most significant change to the tax code” since former President Ronald Reagan’s 1986 overhaul.
“This won’t take until the end of the year,” he said.
The secretary outlined tax reform’s three central goals: simplify the personal tax code, enact middle-income tax cuts and make the business tax code more competitive.
On one of the more controversial proposals under consideration – a border adjustment tax that would increase taxes on imports and decrease them on exports – Mnuchin was noncommittal. He acknowledged some concern about how such a tax might impact the dollar relative to other global currencies, as well as how it might affect the price of consumer goods. But he said the administration is still discussing the issue with the House and Senate.
Amid reports that the administration is trying to put an overhaul of the nation’s health care system back on the agenda after that effort foundered in Congress last month, Mnuchin said tax reform is moving forward regardless of how the fight over health care progresses.
The secretary also said the administration is hoping to attract bipartisan support to its tax reform plan, but they’re prepared to pass the overhaul through the budget reconciliation process, which requires only 51 votes in the Senate if Democrats won’t play ball.