Trump Administration Begins Laying Out Legislative Priorities

Treasury Secretary Mnuchin’s confirmation and President Trump’s February 28 address to Congress provide guidance about when and how the administration will address tax reform, replacing the Affordable Care Act, and other legislative priorities.

Friday, March 3, 2017

During the first month following President Donald Trump’s inauguration on January 20, tax reform and repealing and replacing the Affordable Care Act (a.k.a., Obamacare), two issues that were pillars of President Trump’s campaign, were largely on the backburner as the new administration focused on getting its cabinet nominees confirmed, the controversial travel ban, and other issues. By early March, however, much of the focus has shifted toward laying out and advancing the administration’s legislative agenda, several elements of which could have a significant impact on investors and financial markets.

Steven Mnuchin’s confirmation as Treasury Secretary and President Trump’s address to a joint session of Congress on February 28 have provided a clearer picture of how the administration hopes to shape legislation related to tax reform for individuals and corporations and the Affordable Care Act.

Mnuchin Confirmed as Treasury Secretary
On February 13, the Senate confirmed Mnuchin, a former Goldman Sachs banker who also has worked in the hedge-fund industry and in financing movies, as Treasury Secretary. As the head of the Treasury Department, Mnuchin will play a leading role in shaping and advancing the administration’s policies on tax reform, currency, trade, and financial regulation.

In his first interview after being confirmed, Secretary Mnuchin said that the administration wants to see “very significant” tax reform passed by the August recess, adding that the administration is "primarily focused on a middle-income tax cut and a simplification for business." In the CNBC interview, Secretary Mnuchin said, “We want to get this done by the August recess. We've been working closely with the leadership in the House and the Senate and we're looking at a combined plan.

In a March 1 interview with Fox Business Network, Secretary Mnuchin discussed how the administration plans to offset a reduction of the marginal tax rates for high-income individuals by limiting deductions. Secretary Mnuchin went on to clarify, though, that the deductions for mortgage interest and charitable contributions would stay at their current levels for all taxpayers. The secretary said that the details of how other deductions would be limited for high-income earners were still being worked out.  

On the campaign trail, President Trump and Republicans in Congress advocated for major overhauls of the tax code. Both groups’ plans centered on lowering the corporate tax rate from its current 35%, lowering marginal tax rates for individuals, reducing the value of itemized deductions, and reducing or eliminating the estate tax.

To learn more about the tax reforms that President Trump proposed on the campaign trail and the House GOP tax reform blueprint and how they affect investors, please view the following report:
Post-Election Tax Planning Considerations for Investors

Trump’s First Address to Congress
On February 28, President Trump made his first address to Congress to lay out his legislative priorities, and many of these issues could have a significant impact on investors and financial markets. During the speech, the president reaffirmed his commitment to reforming the tax code and repealing and replacing the Affordable Care Act, as well as increasing infrastructure and defense spending and reforming immigration laws.

One of the biggest challenges facing the Trump administration on tax reform and healthcare will be navigating disagreements among Congressional Republicans on these issues. House GOP leadership has introduced a tax reform plan that includes many of the key elements that Trump advocated for on the campaign trail. The plan, however, has already encountered opposition from some Republicans in the Senate, mainly over the plan’s use of “border adjustment” provisions (i.e., taxing imports but excluding exports) to make up for some of the revenue lost by cutting corporate tax rates. In terms of healthcare, House GOP leaders have proposed a plan that would replace Obamacare with a system that provides refundable tax credits to people who don’t receive health insurance from their employers. More conservative Republicans in the House and Senate have expressed concerns over this approach.

The president’s February 28 speech included few policy details for healthcare and tax reform, but the speech did seem to indicate that the president was open to the ideas of health insurance tax credits and border adjustment. The day after the speech, White House Press Secretary Sean Spicer said the Trump administration plans to release its plans to replace the Affordable Care Act and overhaul tax laws “within the next few weeks,” according to The Wall Street Journal.

Even once the differences among Republicans on these issues are resolved, President Trump and Congressional Republicans will need to work with Democrats. In the Senate, Democrats hold enough seats to block most legislation via filibuster, so some degree of compromise between the parties likely will be necessary to get a bill to the president’s desk.

William Blair will closely monitor the developments in Washington and, as the legislative process surrounding these issues comes into focus, we will keep you updated on how any new laws could affect you.

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William Blair produces educational and timely communications on a variety of wealth management topics of interest to individuals and families at all generational stages of life, philanthropic foundations, and not-for-profit organizations.

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