Special Coverage: Mnuchin Says 20% Corporate Tax Is Firm
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This is Your Money Matters from The Wall Street Journal. Welcome to a special edition of Your Money Matters. I'm J.R. Whalen in New York. Treasury Secretary Steven Mnuchin was a featured guest at The Wall Street Journal's CEO Council in Washington this week. He was interviewed by Wall Street Journal Editor-in-Chief Gerard Baker, who asked Mnuchin about myriad topics, including if he is concerned about the recent record run on Wall Street.
What does Mnuchin say about current market optimism and growth expectations?
Does it worry you at all that people are maybe that expectations right now is reflected in the market and reflected in business and consumer confidence is maybe too high?
No, it doesn't worry me. I mean, I think people are very excited about what the Trump administration economic policies are. I think the president has been very clear this is all about creating growth. We've been in a period for the last eight years of very low growth. The president fundamentally believes we can get back to 3% or higher sustained GDP. And although lots of economists will say that that's not the case, we don't believe in that. We don't believe that the new normal is 2%. We believe that the normal is 3% or higher. And I think you see that built into the markets. And we have a high degree of confidence in getting tax reform done between now and the end of the year. We're looking forward to a successful vote this week out of the House.
It's a big step. And we want to get this to the president's desk to sign. It's critical to the economy.
So you think a large part of that confidence is being reflected in things like market indicators is driven by an expectation that you're going to be able to get this, particularly this tax cut agenda through Congress?
Yes, I made the comment that I think the market has expectations built in, that we're going to get that done, and we have expectations that are built in.
One source of market strength in the past year is the expectation that Congress will pass tax reform, and specifically tax reform that is friendly to corporations. Mnuchin says he's happy with how tax reform legislative plans are progressing through each House of Congress, and he says the fact that the current Senate version would defer some tax cuts should not be of concern.
Look, I think our preference is to start this sooner. But let me just put this in perspective. I've had the opportunity to work with the president since the campaign on his economic plan. We've been working all year with the House and the Senate. And when you look at fundamentally where we are, the president's objectives, the House's objectives, and the Senate's objectives are all aligned. And that's about One, we want to create a competitive business tax system. I think as this group knows very well, we have one of the highest tax rates in the world. We tax on worldwide income, which most people don't do. We have a crazy concept of if you leave the money offshore, you don't pay taxes. So it's not a surprise trillions of dollars are sitting offshore.
And the second priority, and again, this isn't in any particular order, is the president wants us to have middle income tax cuts. And that's what the House plan is about, and that's what the Senate plan is about. And I think when you look at them, There are some minor differences, but the good news is the objectives are exactly the same. And whatever differences there are, I'm comfortable that we will get them together in the conference process.
That 20% corporate tax rate, most estimates suggest right now that companies, on average, because of the way in which they're able to work with the tax system, they pay an average effective rate of 18% or 19%. Is that 20% rate enough, both in terms of the international environment, is it low enough in terms of the international environment to get the kind of boost to investment, in particular investment in the U.S., investment in jobs that you want? And given that that seems to be like the baseline right now, How important is it that it stays as close to 20% as possible? Because there's some suggestion that as part of the compromise process, it may drift up.
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