The House Ways and Means Committee's March 3 hearing with Treasury Secretary Steven Mnuchin focused on the health of the economy post-Tax Cuts & Jobs Act (TCJA) and how to improve it, potential responses to the coronavirus, and further action on corporate tax issues.

Democrats encouraged action on infrastructure investment, which Chairman Richard Neal (D-MA) said should be considered before entertaining proposals for temporary tax cuts and in lieu of any stimulus package. "Before the administration begins to entertain any proposals for temporary tax cuts, the most important way that we can proceed, in my judgment — and I think all Democrats on this committee and many Republicans feel the same way — if we're to develop a stimulus package, the soundest way to do that is clearly to proceed with a major infrastructure initiative that the president has repeatedly promised and you and I have had very meaningful conversations about," he said.

Chairman Neal's comments came during an opening statement and follow press reports that tax cuts have been considered as part of the coronavirus response and President Trump's tweet late March 2 saying, "The Democrats in the House should propose a very simple one year Payroll Tax cut. Great for the middle class, great for the USA!"

Rep. Devin Nunes (R-CA) delivered the Republican opening statement at the hearing that included Super Tuesday references to the Democratic presidential race and said, "while Democrats here today will try to say our reforms aren't working, Mr. Secretary, American workers and businesses are seeing past the liberal rhetoric. Today workers are enjoying one of the strongest economies in our nation's history."

In testimony, Secretary Mnuchin said he is closely monitoring the coronavirus and its effect on supply chains and the broader economy, and earlier had a call with G7 finance ministers focused on international efforts. He said the Administration would work closely with Congress on an emergency funding package and any other issues.

During questioning, Chairman Neal said the Administration has been sending mixed messages regarding the severity of and outlook for the coronavirus and asked that they bring forward factual and unbiased information. Rep. Suzan DelBene (D-WA) said her district has been hit hard with the coronavirus and said while she agrees we must consider economic impacts, she is concerned that the Administration is prioritizing calming the stock market over other concerns. She asked whether the Administration is considering tax relief for small business or suspending tariffs from China or Europe, and the Secretary suggested such moves are not now under consideration.

Infrastructure

Chairman Neal also referenced Acting White House Chief of Staff Mick Mulvaney's February 28 comment that President Trump would seek a further reduction in the statutory corporate income tax rate, from 21% to 20%, if he wins a second term. Neal said what would stimulate the economy is an infrastructure package and that he hopes that the President will demonstrate leadership in finding revenue offsets.

In response to questioning from Rep. Earl Blumenauer (D-OR), Secretary Mnuchin said while it is not reflected in the budget, President Trump is interested in a $1 trillion-$2 trillion infrastructure bill.

Corporate tax issues

Chairman Neal also expressed concern about digital services taxes (DSTs) and making sure OECD proposals take into consideration America's concern about digital taxes. Mnuchin said there is bipartisan support for opposing DSTs.

Rep. Mike Thompson (D-CA) said he has been hearing from the business community regarding scheduled TCJA changes that would raise taxes on businesses but are not addressed in the Administration's FY2021 budget, which does propose to extend TCJA provisions for individuals that expire after 2025. Specifically, he cited tax increases that involve "spreading out cost recovery on research expenses, raising the GILTI rate and further limiting interest deductions," and asked whether it is the Administration's intention to let them take effect. Mnuchin said the Administration is contemplating "Tax 2.0," but as of now, the expectation is to leave everything in place. "It may be something we'd consider down the road, but that's not on the agenda at the moment," he said. Thompson said he doesn't find that particularly comforting.

Rep. Brendan Boyle (D-PA) said some profitable businesses are still not facing tax liability post-TCJA, and it is fueling angst among middle-class taxpayers. He asked if a corporate minimum tax is being considered, as press reports have suggested. Secretary Mnuchin responded by citing GILTI. Rep. Ron Estes (R-KS) later said the TCJA makes it harder for companies to avoid taxes with the BEAT, GILTI, and changes to the NOL rules.

Rep. George Holding (R-NC) thanked the Secretary for the work involved in developing regulations to implement the international reforms included in the TCJA to move the United States towards a territorial tax system and make US companies that create jobs more competitive in the international markets. He said efforts to craft final regulations implementing GILTI are particularly important.

In response to questioning from Rep. Jackie Walorski (R-IN), Secretary Mnuchin said correcting the TCJA drafting error regarding the depreciation of qualified improvement property (QIP) — to clarify that it is 15-year property under the modified accelerated cost recovery system and 20-year property under the alternative depreciation system, and eligible for 100% bonus depreciation — is a top priority of Treasury. That is consistent with his February 12 comment before the Senate Finance Committee that it is "our number one request to get a congressional fix for." Chairman Neal quipped that "as the Secretary knows, there is a path" for achieving the fix, likely referencing year-end 2019 negotiations during which Democrats pushed for expansions of credits for lower-income individuals in exchange for supporting TCJA technical corrections.

EV tax credit

Rep. Jason Smith (R-MO) charged that the Federal government has been subsidizing electric vehicles through the EV tax credit for a long time, with a disproportionate portion of the benefits going to those in California. He advocated repealing the EV tax credit, as the Budget proposes.

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