Mick Mulvaney’s Office of Management and Budget will play a role in shaping the rules to implement the GOP tax overhaul, the Trump administration announced Thursday, a development that settles a turf war that was brewing within the executive branch since the law was signed.
The OMB and Treasury jointly announced that they had reached an agreement to allow OMB to review tax rules issued by the Treasury, and subject them to cost-benefit analysis. Previously, tax rules had been exempt from this kind of OMB oversight, which rules issued by other agencies face.
Part of the agreement, though, is that the OMB must act quickly — within 10 days for rules implementing the Trump tax cuts — if demanded by the Treasury.
“Under today’s agreement, Treasury will continue to swiftly and successfully implement historic tax reform while still avoiding needless regulatory costs and delays,” Treasury Secretary Steven Mnuchin said in a statement.
The agreement will give the White House, and budget director Mulvaney, more direct influence over the way the tax cuts are enacted. Mulvaney and Mnuchin had reportedly been at odds over whether the OMB should be involved.
“It is critical that we complete an efficient yet proper cost-benefit analysis of tax regulations while coordinating across the Executive Branch,” Mulvaney said.
Among the biggest rules to be written are the ones implementing the new tax regime for businesses that aren’t C corporations but rather file through the individual side of the tax code. Such “pass-through” businesses received a special, highly complex deduction in the tax bill. Regulations are sure to play a major role in determining which businesses get the break, and which don’t. With Thursday’s decision, the OMB could sway the rules to provide a bigger or smaller tax cut.
Another major consideration is the new regime for taxation of international profits. The tax law ended the unusual U.S. practice of subject all foreign-earned profits to taxation at the full corporate tax rate, but replaced it with a set of complicated rules for preventing companies from moving their headquarters or jobs overseas.
From the perspective of lobbyists, the White House might be inclined to interpret those provisions in a way that provided bigger tax breaks. Yet some tax reform backers feared that having the OMB help shape regulations would slow down the implementation of the law.
