“We’ll be having a big announcement on Wednesday having to do with tax reform,” Trump said Friday while visiting the Treasury Department. “The process has begun long ago but it really formally begins on Wednesday.”
Addressing Treasury Secretary Steven Mnuchin, Trump said, “So, go to it.”
A White House official who spoke on the condition of anonymity told The Washington Post on Friday night that while the president did plan to make an announcement on tax reform next week, it will be broad in nature.
“[W] e will outline our broad principles and priorities,” the official said. "We are moving forward on comprehensive tax reform that cuts tax rates for individuals, simplifies our overly-complicated system and creates jobs by making American businesses competitive.”
Trump’s statement earlier on Friday had caught many congressional aides — and even some administration officials — off guard, as they thought they were working on a slower timetable.
With his unexpected comments, Trump has jolted the process forward as he tries to breathe new life into an effort that risked becoming bogged down like other campaign priorities.
But if he only issues the broad outline of a plan, he could further complicate lawmakers and many in the business community, who have been hoping the White House would weigh in on key questions, such as how it plans to tax imports or whether it will pursue the elimination of any tax deductions.
Trump plans a major cut in tax rates, focused on simplifying the tax code for individuals and families, lowering the corporate tax rate and a large tax cut for the middle class. He has also said he wants to create some sort of “reciprocity” tax that imposes a tariff-like tax on imports from countries that have tariffs against the United States.
Earlier Friday, Trump told the Associated Press in an interview that the tax cuts he would propose would be "massive" and perhaps the biggest of all time.
Mnuchin has worked on the tax plan for months, but details have remained fluid, with White House officials considering a range of options in how they restructure the tax code. White House National Economic Council Director Gary Cohn suggested Thursday that many of the details were still in flux during comments he made to the Institute of International Finance.
Trump has said a big tax cut will boost economic growth, help companies invest, and lead to more job creation. But Democrats and some Republicans have said any cut in rates should be offset by the elimination of tax breaks to prevent the changes from widening the budget deficit.
Mnuchin said Thursday that the tax cuts would essentially pay for themselves because there would be so much economic growth that it would bring in new revenue to the Treasury Department.
Both Trump and Mnuchin have promised that the overhaul of the tax code they are planning would be the biggest since the Reagan administration.
During the campaign, Trump proposed cutting the corporate tax rate from 35 percent to 15 percent, and he also wants to cut the rates individuals and families pay. He has said he wants a big tax cut for the middle class, though many politicians define “middle class” differently.
"People can’t do their returns," Trump said Friday. "They have no idea what they are doing. They are too complicated."
Many congressional aides were caught by surprise from Trump's announcement, as White House officials have expressed that they were working hard on a plan but nowhere near ready to provide new information. Lawmakers have been anxiously waiting for more details of Trump’s plan for weeks.
“I appreciate the President’s leadership and strong commitment to comprehensive tax reform,” House Ways and Means Committee Chairman Kevin Brady (R-Tex.) said Friday. “Ways and Means Republicans are ready to work with President Trump and his team on reforms that will grow our economy, create jobs, and increase paychecks.”
The release will come during a critical period for Trump. House Republicans are also working on plans to vote to repeal the Affordable Care Act next week, and Congress must vote by Friday to continue funding the government or there will be a partial shutdown.
One reason overhauling the tax code is so difficult is because it is very difficult to do it without dramatically widening the deficit. Many lawmakers want to cut taxes, but cutting tax rates leads to a big drop in revenue, which makes the deficit larger unless there is a sharp contraction in spending. Trump has proposed to boost spending, at least in the short term, and many budget experts believe the tax plan he offered during the campaign would grow the federal debt.
President Barack Obama proposed lowering the corporate tax rate several years ago, but he also proposed raising taxes on the wealthiest Americans as a way to offset some of the lost revenue. This led to major blowback from many Republicans who saw it as a way of raising taxes. He also proposed limiting the deductions that the wealthiest Americans could claim, something that was also rejected.
Trump administration officials have said they will propose limiting some tax breaks, but this is not expected to be a big component of their plan. Instead, they are going to assume future economic growth caused by the tax cuts will create trillions of dollars in new revenue, a controversial assumption that many GOP congressional aides on Capitol Hill have cautioned against.