Treasury Secretary Steven Mnuchin warned Congress that if tax cuts are not passed, the stock market will plunge.
"There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done, Mnuchin told the Politico Money podcast released on Wednesday. "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 also gave an "absolute guarantee" that Trump would sign a major tax bill by the end of the year.
Some analysts on Wall Street have even said that if the tax plan runs into trouble, then a big correction on the market could spur Congress to end up passing the legislation.
"If it suddenly looked like a tax bill was dead, stocks could sell off sharply. Then the blame game would begin," Greg Valliere of Horizon Investments told Politico. "I think Trump would hammer hard at Democrats, blaming their intransigence for a stock market sell-off. A half-dozen Democrats in the Senate, fearing a defeat next year, would waver."
Mnuchin conceded that the plan would cut taxes for the wealthy, one of the criticisms of the proposal, explaining that "the top 20 percent of the people pay 95 percent of the taxes. The top 10 percent of the people pay 81 percent of the taxes.
"So when you're cutting taxes across the board, it's very hard not to give tax cuts to the wealthy with tax cuts to the middle class. The math, just given how much you are collecting, is hard to do."
Mnuchin also defended getting rid of the estate tax, saying that "People pay taxes once. Why should people have to pay taxes again when they die?"
He also acknowledged there is some justification in the concern that eliminating the state and local tax deduction, while also getting rid of personal exemptions, could result in higher taxes on some middle-to upper-middle-class Americans in high-tax states.
"We're working on fixing that right now, so we're conscious of that issue," Mnuchin said.
But he added that the federal government should "get out of the business of subsidizing the states."
© 2023 Newsmax. All rights reserved.