President Donald Trump will take his first trip across the street to the Treasury Department on Friday to sign an executive order and a pair of memos taking aim at the confusing and complex tax system.
The Trump administration hopes to push comprehensive tax reform through Congress. For now, though, the president will settle for changes he can make with the stroke of a pen. The executive order directs Treasury Secretary Steven Mnuchin to review regulations added to the tax code since the beginning of last year.
“Under the previous administration, the tax code has become extremely expensive and burdensome.”
In addition, the president will order six-month reviews of the 2010 Dodd-Frank law regulating Wall Street.
“These three are specifically designed to focus on certain aspects that are enormously important to the Treasury and to the president and that fill in with his campaign promise to make sure that Dodd-Frank is not harming the financial system,” Mnuchin told reporters Friday.
Beyond Dodd-Frank, Mnuchin said the aim is to simplify the tax code. He noted that the basic 1040 tax form has expanded over the years. Americans now spend 6.1 billion hours and $230 billion trying to comply with the tax code, he said.
“Under the previous administration, the tax code has become extremely expensive and burdensome,” he said. “I think everybody would agree that the tax code is way too complicated and burdensome.”
The Treasury Department will review regulations added since January 2016 and recommend eliminating or modifying rules that are unnecessary. Grover Norquist, president of Americans for Tax Reform, told LifeZette that the administration is laying the foundation to use the tax cord to address “corporate inversions,” in which U.S. corporations merge with foreign firms and relocate company headquarters overseas.
“The first one [executive order] on taxes is the president saying the problem with corporate inversions is not bad companies doing bad things,” he said. “The problem is our own taxation system.”
Mnuchin said corporate inversions are part of the reason for the review, but not the only reason.
“It is targeted at things that are significant and create complexity and undue burdensome situations,” he said.
Democrats passed the Dodd-Frank regulations with no Republican support. The law increased regulation of banks and gave the government new power to shut down large institutions that regulators determine are not financially stable. It also created the Consumer Financial Protection Bureau to provide greater scrutiny of credit cards, mortgages, and other financial services.
The memos that Trump will sign will have two parts. The first will review the circumstances under which the government would liquidate financial companies. Mnuchin said the administration would not exercise that power unless required by law and only in consultation with the president, personally.
The second involves a 180-day review of the Financial Stability Oversight Council, which has the authority to set aside certain financial regulations written by the Consumer Financial Protection Bureau.
“We’ll do an analysis to make sure that this doesn’t encourage excess risk-taking, moral hazard, and exposure to taxpayers,” Mnuchin said.
He added: “President Trump is absolutely committed to making sure that taxpayers are not at risk from government bailouts of entities that are too big to fail.”
Mnuchin also offered general support for a bill sponsored by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) to overturn many provisions of the Dodd-Frank law.
“It’s obviously a complicated bill, so I won’t go through the entire bill, but I will say we are supportive of him bringing forward this legislation and look forward to working with him in Congress on the specifics of it,” he said.
Norquist said Congress could remove 70 percent of the pain of Dodd-Frank through a budgetary process that would require only 51 Senate votes instead of the normal 60-vote supermajority.
“Most of what needs to happen must be done by Congress, but the more you put it under attack by executive orders, the easier it is for Congress to move on it,’ he said.
The documents Trump will sign Friday are small potatoes compared with a comprehensive overall of the tax code. Mnuchin said the administration remains committed to simplifying the taxes, reducing rates for middle-class households and more competitive for businesses. He said the administration is close to releasing its plan.
“We have been working extensively from the day I’ve been confirmed,” he said.