THE TICKER

The Trump administration is having a rough time trying to sell its tax plan. 

The team knows that Democrats are eager to poison public sentiment toward the package by branding it as a giveaway to the wealthy. Yet the president's top economic advisers are struggling to dispute the characterization. 

To recap: On Thursday, chief White House economic adviser Gary Cohn wouldn’t certify that the initiative will live up to its as billing a universal tax cut for the middle class. “I can't guarantee anything,” he said on CNBC when asked whether some middle-income earners would pay more under a rejiggered system. 

On Friday, a damning report from the nonpartisan Tax Policy Center seemed to confirm critics' harshest assumptions, concluding the plan would deliver a major windfall to the top 1 percent, with only modest relief for most others and an even higher burden in some cases. House Ways and Means Committee Chairman Kevin Brady (R-Tex.)  blasted the analysis as “misleading, unfounded and biased.” 

But in the absence of more details from the tax-writing committees themselves, the report is continuing to shape the debate.

Treasury Secretary Steve Mnuchin learned that Sunday, when the study formed the basis of the first question he faced from ABC’s “This Week” host George Stephanopoulos. Mnuchin, like Cohn, couldn’t guarantee that some middle-income earners will not see a tax hike. “It is our objective that the entire middle class does get a tax cut. And that's something we're working on the details,” he said. “You can't make guarantees, because every single person's taxes are different.”

And Mnuchin acknowledged the plan includes some major benefits for the wealthy. “As it relates to estate tax, you know, the death tax, we believe that people get taxed once and not twice. And that will enable them to keep lots of family businesses passed along,” he said. “But the estate tax, you are correct. The majority of the estate tax is paid by the wealthy. So we're focused on changes to the income tax system.” 

Then there’s the matter of paying for the measure.

Cohn is on record predicting that tax cuts will pay for themselves through jacked-up economic growth. On NBC’s “Meet the Press,” Mnuchin went further, claiming all that growth will actually yield a deficit-narrowing surplus. But he didn't challenge a reminder from host Chuck Todd that no studies exist to back up the claim. “As soon as the details are out, this will be scored by lots of different academics. We're happy to put plenty of economists on this show who support our plan,” Mnuchin said. 

As The Wall Street Journal’s Kate Davidson writes, the case for tax cuts unleashing growth remains tenuous at best

Economists generally agree tax cuts that aren’t offset by a decrease in government spending will boost the deficit. “Can tax cuts pay for themselves? The evidence overwhelmingly suggests that this is not true,” [University of Michigan economics professor Joel] Slemrod said.

“If it takes a modest deficit to get really good tax policy, I suppose that’s fine,” said Columbia Business School dean Glenn Hubbard, former chairman of the Council of Economic Advisers under George W. Bush. “If it were a gigantic deficit I don’t think that would be fine at all.”

In May, when the University of Chicago Booth Business School’s IGM Forum  surveyed 42 top economists across the ideological spectrum on the issue, 72 percent agreed that since 1980, tax cuts that relied on economic growth to remain revenue neutral actually ended up choking off funding to the federal government. And none believed the Trump tax plan would pay for itself through new growth.  

Sen. Bob Corker (R-Tenn.) forged an agreement with his Senate Budget Committee counterpart Pat Toomey (R-Pa.) on a spending blueprint that will allow a tax package to add $1.5 trillion to the debt over a decade. Yet he maintains that he’ll oppose a final version if it adds “one penny to the deficit,” calling the spending imbalance the “greatest threat to our nation.”

When it comes to the burden carried by the rich, Republicans push back by pointing to the numbers they’ve yet to name in their own plan. ("All I can tell you is that no one can make real, detailed analysis of the plan yet because it's not finished,” White House budget director Mick Mulvaney said Sunday on CNN.) For one, they haven’t announced the income levels that will set the thresholds for new tax brackets. And they’ve reserved the option of creating a fourth bracket for high-income individuals, notionally to preserve the progressivity of the current code. 

But as the last several days have demonstrated, the GOP’s lack of specificity is making it easy for Democrats to fill in the blanks — and tag the package as a sop to the rich, financed by higher taxes on others and deficit spending.

That’s left Republicans starting from behind when it comes to building the public case for action.

Breaking: At least 50 people were killed and 200 wounded after a gunman opened fire Sunday night on a country music festival on the Last Vegas strip in what is the deadliest mass shooting in American history.  The gunman was identified by police as Stephen Paddock and was killed. Follow coverage of the developments here.

MARKET MOVERS

Kevin Warsh, Jerome Powell interview for Fed chief. The Wall Street Journal's Michael Bender: "Other names said to be in contention include current Fed Chairwoman Janet Yellen, whose term expires in early February, Stanford University economist John Taylor and John Allison, the former BB&T Bank chief executive, according to people familiar with the process. Mr. Allison was offered a position on the central bank’s board of governors earlier in Mr. Trump’s tenure, but turned it down, said people familiar with the offer."

  • Powell "joined the Fed’s board of governors in 2012. He was a partner at the Carlyle Group , a private-equity firm, from 1997 to 2005 and a lawyer and investment banker in New York. He served as an undersecretary and assistant secretary for domestic finance at the U.S. Treasury from 1990 to 1993. He has emerged as a reliable ally of Ms. Yellen’s on monetary policy, while also calling for easing some of the bank rules put in place following the financial crisis. This puts him largely in sync with Mr. Trump’s positions favoring low interest rates and financial deregulation."
  • Warsh "served as Fed governor from 2006 to 2011, during the financial crisis, and was an economic adviser to President George W. Bush from 2002 to 2006. He was a member of President Trump’s Strategic and Policy Forum, a group of business leaders that disbanded in August in protest over what they said was Mr. Trump’s failure to sufficiently condemn racism. He was also an economic adviser to 2016 Republican presidential candidate Jeb Bush, who was considered the front-runner for the nomination before Mr. Trump’s rise surprised the political establishment."

Trump says he'll make a decision within three weeksThe Hill's John Bowden: "President Trump said Friday he has met with four prospective nominees to replace Federal Reserve Chair Janet Yellen when her term expires in February, and could make a decision within a few weeks. 'I’ve had four meetings for Fed chairman and I’ll be making a decision over the next two or three weeks,' Trump told reporters before leaving the White House."

Banks buy up stocks of companies that pay highest effective rates and stand to gain most.
Financial Times
Theories abound as to why the fourth quarter is so often the best one for equity bulls. Fund managers need to catch up, holiday spending spreads cheer, investors celebrate the January effect in December.
Bloomberg
U.S. investors are not rewarding companies for generating good earnings consistently, opting instead for a stockpicking strategy that might be called "growth at a high cost."
Reuters

TAX FLY-AROUND: 

Two tax plan sentences that could unleash a billion in lobbying. The New York Times's Ken Vogel: "Tucked away on Page 8, the sentences refer vaguely to plans to repeal or roll back “numerous” exclusions and deductions, and to “modernize” tax rules affecting specific industries 'to ensure that the tax code better reflects economic reality and that such rules provide little opportunity for tax avoidance.' That language has prompted concerns among a wide range of businesses and industries about the prospect of losing valuable tax breaks — from preferential tax treatment for insurers to credits for renewable energy to a prized tax treatment used by the commercial real estate industry."

Trump's two red lines in a tax bill. Politico's Patrick Temple-West: "Cutting tax rates for corporations and the middle class are two 'red lines' that President Donald Trump has established as tax legislation develops in Congress, the White House budget director said Sunday. Responding to a question about whether rich people would benefit from Trump’s tax proposal, [Mulvaney] said debates about details of the tax plan will start in the [House] this week."

Cohn says ending state and local tax deduction is negotiable. Bloomberg's Alexis Leondis and Sahil Kapur: "While the tax framework released Wednesday would eliminate that deduction, the provision isn’t a red line, according to Cohn, the director of the National Economic Council. The deduction is used extensively in high-tax states like New York, New Jersey and California. It’s frequently cited by White House advisers as an example of carve-outs they want to end for the wealthy. Eliminating the deduction would raise an estimated $1.3 trillion that could be used to offset the plan’s proposed tax cuts.'We are willing to work with the tax writers on the other dials that we have in the system,' Cohn said during a Bloomberg TV interview."

And Cohn says repatriation will likely be in 10 percent range

Temporary tax cuts? The New York Times's Alan Rappeport: "Business leaders and conservative economists say a permanent reduction in the corporate tax rate, as opposed to a temporary, 10-year cut, is the best way to spur robust investment and job creation as well as generate the kind of economic growth Republicans say will pay for the tax plan.

But a new analysis from the nonpartisan Tax Policy Center says the corporate tax cuts will cost nearly $7 trillion over the next two decades — $2.6 trillion over the next 10 years and another $4.1 trillion from 2028 through 2037. The hit would be somewhat offset by revenue raised from individual taxpayers over that same period — $470 billion over the next 10 years and an additional $1.4 trillion the next decade. But the entire package is expected to cost an estimated $5.6 trillion over the next 20 years — an amount that economists say would be hard to offset through economic growth alone."

Tax Foundation president says package will leave people better off. CNBC's Trent Gillies: "While the Republican-led tax reform plan is short on some details at this point, the head of a tax policy group called the plan "viable" in an interview with CNBC. 'I think it's a real step in the right direction,' Scott Hodge, president of the non-partisan tax policy research Tax Foundation told CNBC's On the Money recently. 'Not only in just simplifying the tax system, but in creating a more dynamic tax system, one that is more conducive to economic growth.' Founded in 1937, The Tax Foundation is an independent, non-partisan tax policy research organization."

MONEY ON THE HILL

Senate budget sets Nov. 13 deadline for tax bills. CNBC's Jacob Pramuk: "The draft budget resolution for fiscal 2018, released by Senate Republicans on Friday, sets terms for the GOP to overhaul the American tax system through budget reconciliation. It would mean the Senate can pass a tax bill with only a majority vote, rather than the 60 votes usually required. Passing a budget resolution is a key procedural step as the Republican-controlled Congress pushes to fundamentally change the tax code by the end of the year... The House aims to pass its own fiscal 2018 budget resolution next week."

The budget would fast-track votes.  The Hill's Niv Elis: "The Senate budget resolution released Friday would eliminate a two-year-old rule that prohibits the Senate from voting on a bill until 28 hours after the budget impact has been estimated by official scorekeepers. The resolution would scrap the rule that Republicans introduced in 2015 through the fiscal year 2016 budget resolution, which put the wait period in place between the Congressional Budget Office's (CBO) official cost estimate and a vote."

POCKET CHANGE
Hotel lobbyists and Airbnb have developed neighborhood efforts to sway local governments in the battle to regulate the short-term rental market.
The Wall Street Journal
Uber Technologies Inc co-founder Travis Kalanick said he had appointed two new directors, a surprise move that publicly reignited a board battle over the role of the ousted former chief executive.
Reuters
After dropping about 5% between early August and early September, J.P. Morgan Chase & Co. bounced back by nearly 8%.
The Wall Street Journal
TRUMP TRACKER

Mnuchin: No regrets on private plane travel. Reuters's Julia Harte: "Mnuchin’s use of the plane at taxpayers’ expense prompted an outcry from Democratic lawmakers and interest groups and spurred a government watchdog to begin examining whether it violated travel or ethics policies. 'It was approved by the White House and there were reasons why we needed to use that plane that are completely justifiable,' he said on NBC’s 'Meet the Press' program."

No more private flights without Kelly's approval. Politico's Matthew Nussbaum: "The White House cracked down on Cabinet officials' use of private planes Friday, telling them chief of staff John Kelly must approve almost all travel on "government-owned, rented, leased, or chartered aircraft," after Health and Human Services Secretary Tom Price resigned over his own taxpayer-funded flights. Mick Mulvaney, the director of the Office of Management and Budget, sent out the memo soon after Price’s resignation was made public."

President Trump dedicated the trophy of the Presidents Cup golf tournament to hurricane victims in Texas, Florida and Puerto Rico, telling the crowd he wanted the focus on those who "have really suffered."Trump, the tournament's honorary chairman and the first sitting president to attend the...
ABC News
THE REGULATORS

AIG off the hook. The Hill's Sylvan Lane: "An interagency group of financial regulators announced Friday that AIG would no longer be subject to stricter federal oversight under a Dodd-Frank Act provision aimed at preventing crisis-causing bank failures. The Financial Stability Oversight Committee  said the insurance and financial services company would no longer be considered a 'systemically important financial institution' or SIFI."

Trump holds deregulatory event. CNBC"s Christina Wilkie: "President Donald Trump will hold a 'cut the red tape' event at the White House on Monday, highlighting the administration's efforts to eliminate what Trump sees as burdensome government regulation of private businesses. The event will 'highlight the president's broader initiatives on regulatory reform,' a senior administration official told reporters on Friday, and show that 'the regulatory burden is being lifted, that agencies are working hard at accomplishing the president's directives, and that this is making a difference both to the economy and to job creation.'

Trump will not announce any new initiatives, merely emphasize what's already being done. Later in the day, 10 federal agencies will hold breakout sessions to discuss specific actions they're taking to roll back regulations."

The lawsuit challenges the constitutionality of the Consumer Financial Protection Bureau and its rule barring arbitration clauses.
Renae Merle
DAYBOOK

Coming Up

  • The Senate Joint Economic Committee holds a hearing on tax reform and entrepreneurship on Tuesday.

  • The House Financial Services Committee holds a hearing on an update from the director of the federal housing finance agency on Tuesday.

  • The Washington Post’s James Hohmann will have a one-on-one discussion with White House budget chief Mick Mulvaney on Wednesday.

  • The Senate Judiciary Subcommittee on Privacy, Technology and the Law holds a hearing “continuing to monitor data-broker cybersecurity” on Wednesday.

  • Former Equifax CEO Richard F. Smith will testify before the Senate Banking Committee on Wednesday.

  • The Brookings Institution will hold an event on Wednesday.

  • The House Small Business Committee holds a hearing on “Modernizing the Code for the Nation’s Job Creators” on Wednesday.

  • The House Financial Services Committee holds a hearing on examining the SEC’s agenda, operations and budget on Wednesday.

  • The Committee for a Responsible Federal Budget will hold an event on paying for tax reform on Wednesday.

  • The House Ways and Means Committee holds a hearing on the IRS’s information technology modernization efforts on Wednesday.

  • Smith will testify before the House Financial Services Committee on Thursday.

  • The Senate Finance Committee holds a hearing on the nominations of Jeffrey Gerrish, of Maryland, to be a Deputy United States Trade Representative for Asia, Europe, the Middle East, and Industrial Competitiveness, Gregory Doud to be Chief Agricultural Negotiator, Office of the United States Trade Representative and Jason Kearns to be a Member of the United States International Trade Commission on Thursday.

  • The Peterson Institute hosts its semiannual Global Economic Prospects session on Thursday.

  • The Washington International Trade Association holds an event on dispute settlement on Thursday.

  • The Heritage Foundation will hold an event on the direction of FINRA on Friday.

BULL SESSION

Fact Check: Do the world's six wealthiest countries have as much wealth as half the world's population?

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