At Hearing, Secretary Mnuchin Agrees Tax Reform is Working to Boost Jobs, Wages & Investment
WASHINGTON, D.C. – At a Senate Finance Committee hearing yesterday, U.S. Senator Rob Portman (R-OH) questioned Treasury Secretary Steven Mnuchin on a host of topics, including IRS reform, retirement security, and tax reform, which the secretary agreed is making a positive difference for families and small businesses across the country. Portman has been to more than two dozen roundtable discussions as part of his tax reform tour across Ohio.
A transcript of his remarks can be seen below and a video can be found here:
Portman: “Mr. Secretary, I appreciate you being here and you’re here during a time where we can brag about what we’ve accomplished, which is a tax bill that’s helping middle-class families throughout Ohio. The median-income family in Ohio is getting another $2000 a year on average. Wage growth is finally going up, not just in Ohio but across the country. This is something that we’ve all been waiting for a long time. In Ohio, it’s been about a decade and a half. The wage growth last month was 3.4 percent, inflation adjusted, by the way, so some of the numbers we heard a minute ago were not inflation adjusted so, yes, here are the numbers: 1.7 percent average, real – meaning inflation adjusted – in this administration post the tax bill versus 0.6 percent during the Obama administration. That’s reality, and now again we’re finally seeing wages go up even higher, 3.4 percent last month, the highest in over 10 years. If you look at it over a yearlong basis, it’s also the highest since the great recession. So finally, we’re getting the kind of wage growth that all of us have been waiting for and people working harder, longer hours and haven’t seen the ability to get ahead. Now they’re saying, ‘yes, finally we’re beginning to see the benefits of good tax policy being spread more broadly.’ So, I’m excited about that, particularly because if you look at it, it’s the blue-collar workers who are getting the biggest benefit, right? The white-collar wages are not going up quite as fast, so this wage growth is exciting.
“I’ve been all around Ohio, as you know, doing these townhall meetings and talking to our small businesses communities. Had a roundtable discussion the week before last, and I heard the same thing that I’ve heard at the other two dozen of them that I’ve done, which is every single business around the table is doing something to invest in their people or their plant and equipment. To the point earlier about is this really going to result in more investment? Non-residential fixed investment, equipment structures and so on, 7.2 percent annual growth rate in 2018. The highest since 2011. So this is the tale, this is the consequence of tax reform over time. Would you agree with that? That seeing the increase in investment is going to be one of the major benefits of tax reform?”
Secretary of Treasury, Steven Mnuchin: “Yes, I would agree with you.”
Portman: “When you look at the 199A pass-through issue, I heard earlier some of my colleagues talking about folks who were above the threshold getting too much of the benefit. I would make two points. One, that’s about 4.9 percent of taxpayers. Number two, they only get a deduction when they do one of two things, right? Pay wages or make investments. Isn’t that good?”
Secretary Mnuchin: “That is good.”
Portman: “When you look at the wage growth and when you look at the investment growth, part of it is because you and we working together put together a pretty smart package on 199A. It’s not perfect, nothing is in this complicated tax code and this complicated world that we live in but this has enabled us to be able to see higher growth, don’t you think?”
Secretary Mnuchin: “It is and I want to personally thank you for the work that you’ve done in particular on this issue.”
Portman: “You and I worked together a lot on the international side. Again, very complicated. I will give you a quote from a group that met in 2015, the International Tax Working Group. It said that, ‘Tax reforms on the international side work best with a substantial corporate rate reduction and broader tax reform for all businesses.’ That was Chuck Schumer and Rob Portman, we were co-chairs of that task force. That’s exactly what we did. And you’ve worked with us on some issues including the expense allocation issues under GILTI and other things. And to try to be sure that we are getting these benefits broadly but let me ask you this question. Do you think, as some of my colleagues have asked, when they talk about raising the corporate rate, I think if we took the corporate rate back up to let’s say 28 percent or more, maybe even 35 percent but let’s say 28 percent. Do you think that would result in a new trend of foreign acquisitions and inversions that we saw happening before the tax bill?”
Secretary Mnuchin: “Either that or again, an additional slowdown in the economy.”
Portman: “I look at the numbers, businesses were being acquired or inverting at a rapid rate. Three times as many businesses being bought by others rather than the US buying those businesses and we’ve managed to reverse that and now have money actually flowing back in. Two final questions quickly. One is with regard to IRS reform legislation. You and I have talked about this before and I know you’re generally supportive. With the new commissioner now being in place and having gotten through the worst part of the tax season and soon he’ll be through it all together. Do you think it’s time for us to push IRS reform as we talked about at the end of last year to be able to make the agency work even better for taxpayers?
Secretary Mnuchin: “I do and the commissioner and I would look forward to coming up and sitting down with you and going through that.”
Portman: “I think it would be time. One of the things that we’ve talked about that I want to get your view on is the IRS oversight board. It hasn’t worked well. The administrations, and I would say the Obama administration most recently but even the Bush administration, did not embrace it as I’d hoped they would. The idea is that it gives strategic direction to the IRS to avoid some of the problems that we’re now seeing at the IRS in terms of taxpayer service and lack of direction on IP and investment and technology. Do you support the idea of an oversight board going back to its original intent?”
Secretary Mnuchin: “I’d like to go through that with you and kind of weigh the benefits and the issues. Again, there’s a difference between oversight and advisory, but again I’d love to come and talk to you and we could discuss the benefits and the issues.”
Portman: “I think it’s a matter of establishing a strategic direction that’s consistent for the agency. I would like to work with you on that and I hope that you could give us some ideas of what kind of expertise you would be looking for on perhaps a board that is more streamlined and more effective. The other one is retirement security, my time is expired so I’ll just ask you, for the record if you could, just tell us what your views are on trying to move forward with a broader retirement package? We have RESA that we got so close to passing. We also have this issue of frozen defined benefit plans. The Retirement Security Preservation Act deals with that. We’ve got about 420,000 beneficiaries that stand to lose benefits this year alone if we don’t deal with that so I would love to hear your thoughts on that at the appropriate time. If you want to give an answer now, if the Chairman will allow you, otherwise I have to yield back my time.”
Secretary Mnuchin: “I would just comment that retirement savings is an important issue and we look forward to working with you on it.”