US President Donald Trump’s first budget proposal will spare big social welfare programs, such as Social Security and Medicare, from any cuts, US Secretary of the Treasury Steven Mnuchin said in an interview broadcast on Sunday.
Mnuchin said Trump would use his first State of the Union policy speech tonight to preview some elements of his sweeping plans to cut taxes for the middle class, simplify the tax system and make US companies more globally competitive with lower rates and changes to encourage US manufacturing.
Speaking on Fox News Channel’s Sunday Morning Futures, Mnuchin said the budget plan would not seek cuts to federal benefits programs known as “entitlements.”
“We are not touching those now. So don’t expect to see that as part of this budget, okay,” Mnuchin said of the programs, according to a transcript provided by Fox. “We are very focused on other aspects and that’s what’s very important to us, and that’s the [US] president’s priority.”
Mnuchin said Trump “will be touching on tax reform” as part of his first State of the Union speech to the US Congress.
The plan will reduce the number of tax brackets for individuals and offer a “middle income tax cut,” Mnuchin said.
On the business side, Trump wants to “create a level playing field for US companies to be able to compete in the world.”
Mnuchin said Trump was looking at a “reciprocal tax” that would help create more parity with other countries.
Trump administration officials have complained that many countries charge value-added taxes on imports while exempting exports from taxation. The US mainly taxes corporate income.
However, Mnuchin again said he was only studying a House of Representatives border tax adjustment plan from Republicans that would levy a 20 percent tax on imports to encourage more US-based production and exports.
That plan aims to raise more than US$1 trillion in revenue over a decade to offset lower tax rates for businesses.
“So let me just say this is something we are studying very carefully,” Mnuchin said. “There are certain aspects that the [US] president likes about the concept of a border-adjusted tax, there are certain aspects that he’s very concerned about.”
He added that the Trump administration would work with the House and the Senate to craft “a combined plan that takes the best of all of this.”
In a comment suggesting that Trump’s budget and tax plan might use aggressive revenue assumptions, Mnuchin said the administration “fundamentally believes in dynamic scoring,” a budget calculation method that assumes that a lower tax burden boosts revenues by encouraging economic activity.
The US Congressional Budget Office has previously used mainly “static” scoring methods that assume very conservative economic effects of budget and taxes.
“If we make business taxes more competitive, people will do more business here and we’ll get more revenues,” Mnuchin said. “So although there may be an absolute lower rate, that doesn’t necessarily mean it’s a corresponding drop in revenues.”
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