Donald Trump’s pick to head the Treasury Department wasted little time Wednesday spelling out that the incoming administration will seek a complete overhaul of taxation.
“Well, our first priority is going to be the tax plan,” Steve Mnuchin told reporters gathered at the Trump Tower in New York, just hours after word leaked out that he’d be the nominee for treasury secretary.
In his first extensive comments, the former Goldman Sachs executive and hedge fund mogul said the Trump tax plan would include lowering the corporate tax rate and creating an incentive for U.S. corporations to bring back trillions of dollars in overseas earnings.
Mnuchin also made it clear that a tax cut for individuals would not wait until after an overhaul of corporate taxation, but would instead be part of the whole deal. The cuts, he promised, would amount to “the most significant middle income tax cut since (Ronald) Reagan.”
Overhauling the tax code has been a perennial promise, but with Republicans controlling both chambers of Congress, there is clear momentum.
Tax legislation originates in the House of Representatives and Speaker Paul Ryan, R-Wis., and Ways and Means Chairman Kevin Brady, R-Texas, already have their own blueprint and have been discussing with the incoming administration ways to narrow differences.
Experts have warned that Trump’s tax proposals could blow a hole in an already large budget deficit. Fitch Ratings, one of the three largest companies that issue credit ratings on government debt, said in a report Wednesday that it expects the U.S. debt and deficits to go up. The deficit for the 2016 fiscal year, which ended Sept. 30, stood above $587 billion.
“Fitch expects a looser fiscal stance will lead to larger deficits and higher debt,” the report said, based on the assumption that a “scaled-back version of Trump’s campaign platform is adopted.”
Over the short term this could lead to faster growth, Fitch said, but over a longer horizon it could call into question the nation’s creditworthiness.
Even then, the report said, the United States is unlikely to lose its gold-plated AAA rating because of its “unparalleled financing flexibility and the dollar’s status as the pre-eminent reserve currency.”
It simple terms, it means as long as the dollar is the currency to which all other currencies are referenced, the higher debt won’t significantly hurt the cost of borrowing for the U.S. government.
The treasury secretary-designee expected the U.S. annual growth rate to accelerate to between 3 percent and 4 percent. He also said Wednesday that he expected interest rates to remain low for at least two years and that his background as the former co-owner of OneWest Bank in California gives him knowledge of how to help the economy grow.
”Let me first say what I’ve really been focused on is being a regional banker for the last eight years, and I know what it takes to make sure that we can make loans to small and mid-market companies, and that’s going to be our big focus,” Mnuchin said, promising to “scale back regulation so that we make sure the banks are lending.”