- Treasury Secretary Steve Mnuchin and Office of Management and Budget Director Mick Mulvaney are in a disagreement over which cabinet member in his office should be in charge of unveiling the tax law.
- The infighting could lead to a delayed rollout of the law and have a negative impact on both small businesses and corporations.
- Lawmakers and government officials appear to split over which agency should take the lead.
A new power struggle in the Trump administration has broken out.
A fight between Treasury Secretary Steven Mnuchin and Office of Management and Budget (OMB) Director Mick Mulvaney is reportedly holding up the implementation of the new tax law, according to The New York Times. But what makes this power struggle unique is the direct impact it could have on businesses and how they will be affected by the new tax code.
Mnuchin and Mulvaney, who are two of President Donald Trump’s top cabinet members responsible for economic policy, have both supported lowering corporate tax rates and making it more difficult for companies to take their business overseas. But where the two individuals differ is over which arm of the Trump administration should have the primary decision-making responsibility over the tax law and who should have the final say.
The decision to have either the Treasury or OMB take control over the tax rules in the new law could have two major implications.
First, it could influence which small businesses can earn a 20% tax deduction. It also could affect which corporations could be taxed on profits earned outside of the US. The disagreement over which department should lead the way could result in a delay of putting the tax law into action.
Traditionally, the Treasury Department led by Mnuchin has had authority over writing tax regulations through the Internal Revenue Service (IRS) and setting up guidance on how to implement the tax code. Given how quickly the new tax code was signed into law in 2017 and the lack of clarity surrounding it, the Treasury has already taken measures to clarify questions about the law.
Now, the Mulvaney-led OMB is pushing to gain more power over the tax law rollout and cut into the Treasury’s discretion over the law. The Times reported that Mulvaney believes that Mnuchin and the Treasury’s decisions over tax regulations are of significant economic importance and should be analysed by the OMB. Additionally, Mulvaney thinks that the Treasury Department’s expanded role in policymaking warrants it more scrutiny from the OMB and that the IRS should be subject to more accountability.
The OMB is responsible for reviewing regulations issued by federal government agencies, but the Treasury has been exempt from this oversight for 35 years. Under President Ronald Reagan in 1983, a memorandum of understanding was agreed upon, prohibiting the budget office from overseeing the Treasury’s tax guidance because it was not considered significant enough economically. Mulvaney now believes that the Treasury’s tax guidelines could affect hundreds of millions of dollars.
Opinions over which department and cabinet should take the lead appear to be split. Some congressional Republicans are reportedly backing Mulvaney, who previously served as a House representative, and the budget office, with hopes that the OMB would push for flexible regulations that allow businesses to pay lower taxes.
‘The swamp is going to be enriched by this one’
Other lawmakers believe worry that adding Treasury to the mix could add more red tape to an already slow-moving process for businesses.
“There’s a moderate level of concern that it could potentially slow down the guidance process,” said Ken Spain, a partner at CGCN Group, a lobbying firm with a number of tax-related clients. “Any time you blur the lines on what is already a tricky process to navigate, it’s going to give the business community some degree of heartburn.”
There are also concerns that the OMB does not have the proper resources and knowledge base on tax regulation to take on the new responsibility, and that it could be a slippery slope to allowing more political aides and lobbyists to add their opinion.
“Midlevel political appointees get their fingers in there, find out when the meetings are and have their opinions,” said Adam Looney, a senior fellow in economic studies at the Brookings Institution. “The swamp is going to be enriched by this one.”
Trump, who called last year for the 1983 arrangement between both offices to be reviewed, might have to make the decision himself if the two departments do not reach a solution.
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