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- Treasury Secretary Steven Mnuchin said the stock market will tank if the GOP tax bill is not passed during an interview on a podcast. Mnuchin also “absolutely guaranteed” the tax bill would be on President Trump’s desk by early December. He also addressed the estate tax repeal, cutting taxes for the rich, and eliminating the state and local tax deduction.
Treasury Secretary Steven Mnuchin said that the key to maintaining the strength of the stock market is the passage of President Donald Trump and GOP leaders’ tax reform package.
On the Politico Money podcast with Ben White, Mnuchin said that the markets has “baked into it, reasonably high expectations” for a significant corporate tax cut, helping to boost stocks to the recent all-time highs.
Conversely, said Mnuchin, if the tax bill were to fail it would take out that support system for the market.
“To the extent we get the tax deal done, the stock market will go up higher. But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains,” Mnuchin said. Stocks have reached record highs this year, extending a nine-year bull market that began after the financial crisis. A portion of those has come from what’s called the Trump trade, a rally in companies that stand to gain the most from the Trump administration’s efforts to instill pro-business policies. Those shares, though, were at their highest in March and other factors have also contributed to the run-up in financial and technology stocks.
Mnuchin added that a tax bill is not “priced in 100%” so if a bill is passed, the market will still go up some.
The Treasury Secretary gave his “absolute guarantee” that the tax bill will be passed in 2017 and said Congress plans to have the billion Trump’s desk to be signed by early December.
As it stands now, the Senate must pass a budget resolution this week to unlock the process known as budget reconciliation. Reconciliation will allow Republicans to pass a tax bill with a simple majority in the Senate, avoiding a Democratic filibuster.
Once that is done, the bill must be released and go through committees in both the House and Senate before being considered for a vote in either chamber.
Among other things, Mnuchin said that it’s “very hard not to give tax cuts to the wealthy” when cutting taxes for the middle class as well and defended the elimination of the estate tax as a “philosophical issue.”
Perhaps most interestingly, Mnuchin said that the administration is considering changes to the repeal of the state and local tax deduction. The deduction, which allows people to deduct their state and local taxes from their federal tax burden, has been defended by Republicans in states like New York, New Jersey, and California. Those three states draw a significant amount of the benefit from the deduction.
“We’re working on fixing that right now,” Mnuchin told Politico. “We’re conscious of that issue.”
You can listen to the full interview via Politico here: