Conservatives Fret McConnell, Mnuchin Lowering Tax Reform Expectations

Key leaders in push for GOP legislative priority discuss 'temporary' and 'revenue-neutral' measures

Conservatives who thought Republican efforts at tax reform would be more successful than the party’s failed attempts at achieving health care reform earlier this year could be in for a disappointment.

Appearing at a question-and-answer session Monday morning at the Louisville, Kentucky, Chamber of Commerce with Treasury Secretary Steve Mnuchin, Sen. Majority leader Mitch McConnell appeared to suggest that any tax reform plan the GOP manages to pass will be revenue neutral, a blow to those hoping to see a reduction in government spending.

“I think that’s where we’re likely to end up,” said McConnell when asked if the GOP tax reform plan would be revenue neutral and therefore permanent. “There’s some internal debate about that that we’ll have to sort out among ourselves, but I think that’s likely where we end up.”

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Mnuchin immediately followed up and appeared to suggest that there is a chance that the tax reform plan, even if revenue neutral, may still be only temporary. “The other thing I’ll add that I’ve said before: Permanent is a lot better than temporary, and temporary is a lot better than nothing,” he said.

The news is sure to disappoint those who hoped President Trump would impose significant restraints on government spending and begin to take significant steps to actually decrease the deficit.

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“I personally think revenue neutrality is a big mistake,” Stephen Moore, a distinguished visiting fellow at The Heritage Foundation and former economic advisor for the Trump campaign, told LifeZette.

“Revenue neutral means for every dollar you cut for one person someone else has to pay that dollar,” Moore explained. “I don’t think you can give people a very good, meaningful tax cut [if you maintain revenue neutrality].”  While President Trump’s own “Tax Reform That Will Make America Great Again” is also revenue neutral, a revenue neutral tax plan simply does nothing to slow or stop government spending.

Even if the Republicans can only achieve “a 10- or 15-year” tax cut, “it should not be revenue neutral — it should be a tax cut for the economy,” said Moore, arguing that there was no need to maintain revenue neutrality. “If you get more growth, then that growth should make up in the medium term for that loss in revenue.”

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Economic analyst Larry Kudlow, the host of CNBC’s “Kudlow Report,” told LifeZette that while he believed it was still too early to say with certainty whether or not the plan proffered by Republicans would be revenue neutral, as McConnell indicated, whatever plan is devised in the end should certainly not be revenue neutral.

“These guys should not let process get in the way of meaningful tax cuts,” he said. “There’s plenty of ways to deal with that — one of them is to assume 3 percent economic growth, which is what Mnuchin’s been saying.”

On Sunday, the Financial Times reported that the administration is readying to “push hard for tax reform,” as part of a bid to rally Republican support around President Donald Trump’s legislative agenda, after the fallout from controversial comments Trump made in the aftermath of a far-right rally in Charlottesville, Virginia.

(photo credit, homepage image: Gage Skidmore, Flickr)

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