Treasury Secretary Steven Mnuchin implored Congress on Friday to raise the federal debt ceiling and signaled an openness to negotiating changes to the tax code, illustrating how the Trump administration will have to work with Congress on other top issues even as an overhaul of health-care rules hangs in the balance.
Mnuchin, speaking at an event in Washington hosted by the news site Axios, also said that overhauling the tax code – which hasn’t been done since 1986 – should prove easier than the effort to repeal and replace the Affordable Care Act.
“Health care and tax reform are two very different things,” Mnuchin said. “Health care is a very, very complicated issue. In a way, [tax changes are] a lot simpler. It really is.”
Mnuchin did walk back a commitment to ensure that any overhaul of the tax code would not reduce the tax burden for wealthier Americans. In the past, he has said that changes to the tax code would not allow the wealthiest Americans to lower the amount they pay in taxes. On Friday, he said this was the “goal.”
“We’re working towards that as a goal,” Mnuchin said. “Don’t hold me to it at the penny, but that is the direction we’re heading, absolutely.”
Mnuchin, a former Goldman Sachs executive and Hollywood producer, has expansive corporate experience, but —like many of President Trump's top advisers — he has not had to negotiate a major piece of legislation with Congress. The White House and some House Republicans have sparred over how to repeal and replace the Affordable Care Act, and it's unclear whether they will use a different negotiating style with changes to the tax code. Mnuchin, in his comments on Friday, made clear that he would play a prominent role in the White House’s tax plan, and he seemed eager to work with lawmakers to cut deals.
He said the goal of the tax overhaul would be to provide a large tax cut for “middle-income” Americans and to cut taxes for businesses in the hope that they would bring money back from overseas and invest more in their U.S. operations. Trump had proposed lowering the corporate tax rate from 35 percent to 15 percent, but Mnuchin said that was open for discussion with Congress. He also said that Trump planned to raise taxes for hedge fund managers and others who benefit from rules that allow them to pay lower rates than other Americans.
Still, what the final changes look like is still open for discussion, he said. “I would say it's premature” to say precisely what the tax changes would look like, Mnuchin said. “We want to get [tax rates] a lot lower than we are now.”
Trump has said he wanted to work on the overhaul of the tax code before his administration tried to repeal and replace the Affordable Care Act, but Mnuchin said Friday that this might not have been possible.
“We’ve been working the last two months on tax reform,” Mnuchin said. “This is something we are designing from scratch and running through a lot of scenarios.” If they had tried to start the tax overhaul right away, he said, “we would not have been ready … but now we are.”
Mnuchin has said that the administration wanted to overhaul the tax code by Congress's August recess, but on Friday he acknowledged this might not be possible. If it isn’t completed by the August recess, “we’ll get it afterwards,” he said.
Overhauling the tax code is one of Washington’s most elusive challenges, which presidents from both parties have tried and failed to achieve for years. Presidents George W. Bush and Barack Obama successfully managed to achieve some changes to tax rules. But none were as sweeping as Trump has proposed, which would sharply reduce rates that he has said will grow the economy but that experts believe would widen the budget deficit for years.
Mnuchin also offered a wide range of views on trade and debt issues.
He said that Trump would soon begin renegotiating the North American Free Trade Agreement and also “make sure we have strong enforcement of agreements.” He didn’t go into much more detail, but his comments suggested the White House could seek to penalize countries that Trump feels are seeking an unfair advantage against the United States. Mnuchin cited “steel dumping,” which U.S. officials have accused China of doing to harm the U.S. steel industry by selling excess Chinese steel at low prices.
“As long as we can renegotiate deals that are good for us, we won’t be protectionist,” Mnuchin said. “Otherwise, we will.”
On the debt ceiling, Mnuchin said Congress needed to act by the end of the summer to ensure that the nation would not default on its obligations.
“Everybody understands that the debt ceiling will be raised,” Mnuchin said. Republicans have been reluctant to raise the debt ceiling, demanding steep spending cuts in exchange for their vote. Trump has said that Republicans should use the debt ceiling as leverage in political negotiations, but Mnuchin has said that the debt ceiling must be raised.
The U.S. government spends more money each year than it brings in through revenue, and it borrows money to cover the difference. But it can only borrow as much money as the debt limit allows. In 2015, Congress suspended the debt ceiling until March 15, 2017, and the Treasury Department is now taking steps to delay certain payments, such as pension investments, so that the government can continue meeting its obligations.
But it will only be able to continue taking these emergency steps until August or September, budget experts anticipate, before Treasury will have to take more drastic steps and could run out of cash to finance basic government operations.