WASHINGTON – The Trump administration is unlikely to meet its self-declared August deadline for enacting tax reform, Treasury Secretary Steven Mnuchin said Monday. That will make it more difficult for companies to factor any changes into their spending decisions for next year.
The failed effort to repeal and replace the Affordable Care Act, also known as Obamacare, threw off a timetable that even Mnuchin had admitted was ambitious for the complex task of overhauling the tax code, he told the Financial Times.
“It started as (an) aggressive timeline,” Mnuchin said. “It is fair to say it is probably delayed a bit because of the health care” debate.
Mnuchin said Monday he still expected tax reform to be enacted this year.
Shortly after taking office in February, Mnuchin said the administration wanted to pass major tax legislation by the time Congress left for its August recess. But he said at the time that the effort “could slip to later this year.”
Enacting tax reform, including a cut in the corporate tax rate, by August would have allowed businesses to take the changes into account – particularly expected lower tax rates – as they planned for 2018.
Congress also works better when facing a recess deadline, so failure to enact the legislation by August means it might not happen until sometime in the fall – if at all.
It’s possible tax reform efforts could fail, as did the attempt to replace Obama’s health care law. Or, at the least, an overhaul of the tax system could take much longer than anticipated. The last major tax changes, in the 1980s, took more than two years to enact.
The Trump administration and congressional Republicans are still drafting their tax proposals. And the House Republican push for a controversial border adjustment tax looms as a major sticking point.
The tax, which would subject importers to higher taxes than exporters or those that produce products in the U.S. for domestic consumption, could raise $1 trillion in revenue over 10 years. The money would help offset a sharp reduction in the 35 percent corporate tax rate.
But the border adjustment tax has split the business community. Major exporters want it. But retailers that import a lot of goods, such as Wal-Mart Stores Inc., oppose it.
Mnuchin said Monday that Treasury officials were still studying the border adjustment tax, but that there might be other ways to raise the $1 trillion in revenue.
“That is not to say we have taken it off the table,” Mnuchin said.
The Trump administration and congressional Republicans are trying to craft a tax overhaul without increasing the deficit. Mnuchin said that stronger economic growth triggered by an overhaul could help offset projections of lost revenues from lower rates.
“Economic growth creates lots of revenues,” he said. “When you calculate whether it is deficit-neutral or not, there are a bunch of different calculations and a bunch of models. I am just pointing out the magnitude of what economic growth does.”
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