Tax Reform Watch: New Budget Reinforces President’s Tax Goals; a Look at Who’s Who in Tax Reform – May 25, 2017 by Tracy Monroe

We heard from Treasury Secretary Steve Mnuchin and Director of Economic Government Council Gary Cohn when they first released the President’s tax reform plan back on April 26, 2017. On Tuesday of this week, we had the chance to hear from the remaining member of the trio key to helping the President create tax reform: Director of the Office of Management and Budgets Mick Mulvaney. We provide some details on this trio farther down, but Mulvaney’s comments after releasing the President’s FY2018 budget, “The New Foundation for American Greatness,” are worth some attention.
 
While the budget does not provide any further detail on tax reform, it does reemphasize the President’s focus on lowering individual and corporate tax rates. Mulvaney shared some interesting thoughts on the budget, first saying that “for years and years we’ve simply looked at a budget in terms of the folks who are on the back end of the programs, the recipients of the taxpayer money, and we haven’t spent nearly enough time focusing our attention on the people who pay the taxes.” He also pointed out another focus of the budget is to continue working towards sustained 3% economic growth — even though many feel this goal is unattainable or unreasonable despite the fact that for most of our country’s history GDP growth has exceeded 3%. The difference between 2% growth and 3% growth may not sound like much, but in reality it is very significant, as it represents a 50% increase in growth.
 
During his budget presentation, Mulvaney also touched on one of the key goals of tax reform: simplicity. He remarked that the proposed budget does not assume any closure in the tax gap, and he believed that tax reform would result in greater compliance. The tax gap is the difference between the total tax owed and the total tax actually paid; it is estimated at $486 billion for 2016. Mulvaney speculated that for some taxpayers the system is just too complicated to be compliant, and therefore a simpler system would encourage more compliance. I don’t agree with him on this point. I believe that even if a tax return is reduced to the size of a postcard, the tax gap will continue to be substantial. My opinion is based upon the fact that much of the tax gap exists because of the cash economy and individuals’ ability to avoid tax by simply conducting their business “under the table.” It ultimately may be necessary to enact a national sales tax to decrease the tax gap, but that’s a topic for another blog.
 
Ultimately, the President’s budget sends a clear message that the goal of economic stability and growth remains very much a driving focus of this administration, which will complement future tax reform efforts. As a further aid to understanding all the aspects surrounding tax reform and the process, below is a recap of the key advisors closest to the President when it comes to tax reform. 

Mick Mulvaney

  • As director of the OMB, Mulvaney is responsible for producing the President’s budget in addition to measuring the quality of agency programs, policies and procedures to ensure they comply with the President’s goals. He is also responsible for coordinating inter-agency policy initiatives.
  • Prior to being confirmed as the director of OMB, Mulvaney was a Republican congressman from South Carolina.
  • He has been working very closely with the President’s other financial advisors, Treasury Secretary Steven Mnuchin and Director of National Economic Council Gary Cohn, to develop what tax reform will look like. 

Steve Mnuchin

  • As treasury secretary, Mnuchin is the acting head of the Department of the Treasury, and deals with all financial and monetary matters directly relating to the government. He is the principal economic advisor of the President and plays a major role in formulating economic policy (enter: tax reform).
  • He was a Goldman Sachs executive until 2002 when he left to found several hedge funds.
  • Mnuchin is credited with financing the movies X Men and Avatar and producing many movies including American Sniper.
  • He worked on President Trump’s campaign as national finance chairman. 

Gary Cohn

  • As director of Economic Government Council, Cohn has four functions: coordinate policy making for domestic and international economic issues; coordinate economic policy advice for the President; ensure that policy decisions and programs are consistent with the President’s economic goals; and monitor the implementation of the President’s economic policy agenda.
  • Previously Cohn served as president and COO of Goldman Sachs.
  • He has a northeast Ohio connection; he is originally from Shaker Heights, Ohio, and attended Gilmour Academy. 

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