(CNSNews.com) – “There are about 100 people working at the Treasury on the issue of tax reform,” Treasury Secretary Steve Mnuchin told the Senate Banking Committee on Thursday.
“It is our goal to bring relief to middle-income Americans and make American business competitive again. We will do this all while simplifying the tax system.”
Mnuchin noted it has been more than 30 years since the nation has overhauled its tax code, and he said he believes that economic growth of three percent or more is achievable – “if we make historic reforms to both taxes and regulation.”
Sen. Jack Reed (D-R.I.) asked Mnuchin if he would commit to no tax increase for families or individuals making less than $250,000 a year.
“Let me just say that obviously tax reform is something that we are working on with the House and the Senate, but I can assure you that the president's objective and my objective is that we create a middle-income tax cut and that we do not raise taxes on the middle income. If anything, the opposite. We are trying to create a middle-income tax cut.
As for tax cuts for the rich – a familiar mantra of Democrats – Mnuchin said the administration wants to get rid of “almost every single deduction” that benefits wealthy taxpayers in exchanage for a “slight reduction in taxes.”
“And our objective is that 95 percent of Americans won't need to use itemized deductions and will be able to fill out simplified tax returns. And we look forward to working with you as we progress on the details,” Mnuchin told Reed.
Mnuchin also said he is “committed to make sure that rich people do not use pass-throughs as a loophole to pay lower rates.”
The so-called pass through provision allow some businesses (S corporations, limited liability companies, sole proprietorships, and partnerships) to avoid the corporate tax rate by passing through their profits to the owner’s individual tax returns, where the top rate is 39.6 percent.
“So we do want small- and medium-sized businesses to have the benefit of lower rates but we will make sure that, you know, not every single accountant, lawyer, and doctor who should be paying higher personal rates sets up an LLC or a pass-through to get around the system,” Mnuchin said.
The administration proposes cutting the rate on pass-through entities to 15 percent.
Sen. Elizabeth Warren (D-Mass.) asked Mnuchin, “Why is this administration giving the ultra-wealthy this massive tax cut?”
“So I can assure you, and I've said this repeatedly, we are not going to allow all pass-throughs to get that rate," Mnuchin said. "We are going to make sure that small- and medium-size businesses have the benefit.
“But we will put procedures in place, and I specifically said this, to make sure that people who should be paying higher taxes do not use pass throughs to arbitrage the system.”
Mnuchin added, “There'll be a box that you have to check that says, I'm eligible for the business tax, which is 15 percent. And there will be qualifications around (that).”
“It will not be available to everyone,” he added.
Sen. Jon Tester (D-Mont.) asked Mnuchin to assure Congress that the administration’s tax plan would not add to the debt:
“What I have said repeatedly is that any plan we put forward we believe should be paid for with economic growth,” Mnuchin replied.
Mnuchin told the committee he expects to produce a plan "with a lot more details” in the near term.
But he agreed that it’s “correct” to say that the administration's plan would cut the corporate tax rate, the pass-through tax rate, reduce the top marginal tax rate for individuals, and eliminate the alternative minimum tax as well as the estate tax.