Before vote, promised Treasury analysis of tax bill elusive

WASHINGTON >> In pitching the $1.5 trillion tax overhaul, Steven Mnuchin, the Treasury secretary, has said repeatedly that the plan will pay for itself through a surge of economic growth and that more than 100 people in Treasury are “working around the clock on running scenarios for us.”

Mnuchin has promised that Treasury will release its analysis in full. Yet, just one day before the full Senate prepares to vote on a sweeping tax rewrite, the administration has yet to produce the type of economic analysis that it is citing as a reason to pass the tax cut.

Those inside Treasury’s Office of Tax Policy, which Mnuchin has credited with running the models, say they have been largely shut out of the process and are not working on the type of detailed analysis that he has mentioned. An economist at the Office of Tax Analysis, who spoke on the condition of anonymity so as not to jeopardize his job, said Treasury had not released a “dynamic” analysis showing that the tax plan would be paid for with economic growth because one did not exist.

Instead of conducting full analyses of tax proposals, staff members have been running numbers on individual provisions or policy ideas, like lowering the tax rate on pass-through businesses and figuring out how many family farms would benefit from the repeal of the estate tax. Activity has picked up more recently as Treasury has sought to provide technical assistance to the Joint Committee on Taxation and the Congressional Budget Office for their estimates.

A Treasury official said there was not sufficient time to produce a full analysis with growth and revenue estimates of the final bill, which the Senate Finance Committee passed before Thanksgiving. The official pointed to a letter sent this week to Mnuchin by nine top conservative economists detailing how the Republican tax bills could bolster economic growth, saying that reflected the findings of its own economic models.

The lack of any formal assessment of the bills’ economic effect from the administration comes as Republicans barrel ahead with a plan that is expected to add $1.5 trillion to the deficit at a time when the federal debt has topped $20 trillion. Deficit hawks, including lawmakers like Sens. Bob Corker of Tennessee and Jeff Flake of Arizona, have been asking for analyses that show how the plan will avoid ballooning the deficit, which reached $666 billion, or 3.5 percent of gross domestic product, for fiscal 2017.

The Trump administration could come under renewed pressure this week to justify its claims about the economic growth and revenue that it says the Republican tax plans will create. The Joint Committee on Taxation is rushing to finish its own analysis of the Senate bill before a vote, and many analysts expect that the results will fail to match the optimistic assumptions being made by lawmakers.

Mnuchin, in an interview in October, said he was prepared to rebut such differences.

“There is certain things we’ll agree with Joint Tax, there’s certain things we won’t necessarily agree with Joint Tax and we’ll explain the differences,” Mnuchin said. “We want complete visibility.”

Thus far, such visibility has remained out of reach. The only detailed study of the Republican tax framework that the administration has released was a report published by the Council of Economic Advisers in October that asserted that the corporate tax cut proposal would increase a typical household’s income by $3,000 to $7,000 a year.

A spokeswoman for the council said no additional analyses of the tax bills were in the works. A spokesman for the Office of Management and Budget said he was unaware of any new reports from the agency about the economic effect of the tax bills.

The lack of information means that some lawmakers who have long criticized exacerbating the deficit are left making a big decision in the dark.

Corker said Treasury Department officials told him last week that he would be provided with a Treasury analysis before the full Senate considered the bill. But he said this week that Treasury was unable to deliver on that promise when officials met with him Monday to assuage his concerns about the cost of the Senate tax cuts.

“I don’t know, I think they still have some work to do,” Corker said in an interview, when asked about the promised analysis. “They came over, had a very nice meeting, but there’s no modeling yet.”

Some Democrats have seized on the absence of a Treasury assessment as evidence that the bill will not do what Republicans claim.

“This administration’s top salesmen spent months trying to con the American people into buying false claims about their tax plan,” said Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee. “Treasury has broken this promise intentionally and know the truth would sink this scam once and for all. They’re doing everything they can to cover up Republicans’ middle-class tax hike.”

Paul O’Neill, the first Treasury secretary under President George W. Bush, said he considered conducting a dynamic score before the 2001 tax cuts but ultimately stuck with a traditional analysis that did not make projections about the effects on economic growth. O’Neill said he was dumbfounded by the notion that the tax cuts working their way through Congress would not add to the debt.

“The whole thing seems astounding to me,” O’Neill said. “The idea that after the most recently completed fiscal year where we had a $660 billion deficit we’re talking about a big tax cut.”

In 2006, Bush’s Treasury Department did a dynamic analysis of the effects of making his tax cuts permanent, and the results undercut some of the arguments about the merits of such a move.

The lack of an economic analysis comes during tension between the Treasury’s political appointees and the career tax experts in the Office of Tax Analysis. According to current and former employees of the department and the people who know them, the career employees have been largely shut out of the process.

“These people are dyed-in-the-wool bureaucrats; they are passionate about it, and to kind of have their views disregarded, I don’t think any of them have really seen it to this degree,” said Austin Frerick, an economist at the Office of Tax Analysis who left in May to run for Congress as a Democrat in Iowa. “That’s where the frustration comes.”

The angst among the career employees in the department began to bubble up this year, Frerick said, when Treasury’s political appointees started to press to remove a 2012 research paper that contradicted the administration’s views about how much corporate tax cuts would lead to wage growth. According to Frerick, the discussions sometimes grew tense to the point that James Mackie, director of the Office of Tax Analysis and a longtime Treasury employee, would leave the office visibly upset.

“He was mad about it,” said Frerick, who used to sit next to Mackie. “He left the discussions very frustrated.”

Mackie, who declined to comment, recently announced that he would retire from Treasury by year’s end.

“I am departing with very mixed feelings,” Mackie wrote in an email to his colleagues announcing his departure after 32 years at Treasury to take a job at Ernst and Young. “These are thick cords to cut. But it’s time.”

Mnuchin, for his part, offers frequent public praise for Treasury’s tax staff on the effort to rewrite the tax code, and he has played down the removal of the paper in question as an obvious decision.

“To the extent that there was something that was completely inconsistent with what we’re publishing now, we thought it made sense to take down,” he said. “We didn’t hide the fact that we took it off.”