Political News

Treasury Inspector General Finds No Political Meddling in Tax Analysis

Posted January 11, 2018 7:13 p.m. EST

WASHINGTON — An inquiry into the Treasury Department’s role in crafting and assessing the Trump administration’s tax plan found no evidence of any improper political interference with the career tax staff, but cast doubt on whether the department’s robust economic growth projections were achievable.

The Treasury Department’s Office of Inspector General launched a probe into the practices of Treasury’s Office of Tax Analysis after The New York Times reported on the lack of a Treasury analysis of the $1.5 trillion tax plan and concerns that career tax staff were shut out of the tax bill process. Steven Mnuchin, the Treasury secretary, had repeatedly asserted that the tax bill would pay for itself and that Treasury staff were working on a detailed analysis of the plan’s costs that would bear out that assertion.

The Treasury Department did not provide that analysis before the Senate voted on the tax bill and did not provide Sen. Bob Corker, R-Tenn., a promised analysis showing the tax plan would not add to the federal deficit. The lack of the analysis raised questions whether Treasury’s team of tax experts could really back up Mnuchin’s claims that the tax bill would not balloon the deficit.

“It is unclear whether the Department’s involvement in the tax legislating process in 2017 has been any more or less ‘political’ than it has been in past years,” Rich Delmar, the counsel to the inspector general, wrote in a report outlining its findings. “I do not see a basis to conclude that the process employed by Treasury this past year was contrary to law, an abuse of authority or otherwise improper.”

The career tax staff officials interviewed by the inspector general said that they were not shut out of the process or ordered to hide their work.

In a letter outlining the report, Eric M. Thorson, the inspector general, said that Office of Tax Analysis officials said their analyses were not released publicly because the office had gotten the impression, as the legislative drafting process picked up, that congressional staff and lawmakers were “less interested in getting OTA’s input.”

The report, which is based primarily on an interview with the department’s top tax expert, James Mackie, said that Mackie appeared to agree with Joint Committee on Taxation analysis that showed the Senate’s version of the legislation would add $1 trillion to the deficit over a decade, even when factoring in additional economic growth.

Mackie, the director of the Office of Tax Analysis, had no official position on the estimates but told the inspector general that they are “widely considered to be reasonable,” according to the report. Mackie is retiring from the department this month.

Treasury ultimately released a one-page analysis on Dec. 11 showing that the tax plan would more than pay for itself when using the Trump administration’s optimistic economic growth assumptions that factored in future economic policies. Tax experts from conservative and liberal think tanks criticized that report, which estimated a 2.9 percent growth rate, for using unrealistic projections.

The inspector general said that Mackie “declined to give a substantive answer” as to the likelihood of the 2.9 percent economic growth rate, but the report points out that such growth is “rare.”

“Bureau of Economic Analysis data indicate that such a run, in duration and magnitude, would be greater than has been the case in the U.S. since World War II,” the report said.

The Treasury inquiry was requested by two Democratic senators, Elizabeth Warren of Massachusetts and Ron Wyden of Oregon, the ranking Democrat on the finance committee. They said the report shows that Treasury was hiding the truth about the cost of the Republican tax cuts.

“This report confirms that congressional Republicans had no interest in unbiased analysis of the final tax bill by Treasury experts, and makes clear that Republicans sold the bill based on unsubstantiated and unrealistic assumptions so they could give a $1.5 trillion giveaway to their donors,” Warren said.

Wyden was unconvinced by the conclusion that the Treasury career staff members were free from interference.

“This political meddling has left a black mark on the once-sterling reputation of the career employees at the Treasury Department,” he said.