Steven Mnuchin, the nominee for Treasury secretary, told a Senate confirmation panel Thursday that if confirmed he would work to simplify the tax code, including closing tax loopholes that permit offshore funds invested in by pension funds and non-profits, and making sure that hedge funds and other partnerships don't abuse pass-through tax provisions.
When asked during his confirmation hearing before the Senate Finance Committee how the incoming administration's tax policy would benefit average Americans, including their retirement savings, Mr. Mnuchin said, “we need to protect the pension holders in this country. … I'm very concerned about the retiree issue.”
Multiemployer pension plans also came up during his hearing.
While participants in struggling multiemployer pension funds “deserve to get their pension, we have to be very careful that we don't have a bailout of the entire pension industry and don't commit to a bailout of the (Pension Benefit Guaranty Corp.),” Mr. Mnuchin said. “I think we should go to great lengths to figure out other solutions before we have to do that.”
Mr. Mnuchin also called for removing incentives for companies to pay taxes overseas and pledged to dedicate more resources to the IRS. He would raise the federal debt ceiling “sooner rather than later so we don't run a risk of defaulting,” and he believes a bipartisan fix for reforming the federal mortgage agencies is possible, he told the panel.
Several committee members questioned Mr. Mnuchin about offshore investment funds in his role as managing director of hedge fund Dune Capital Management registered in Anguilla and whether he would support removing the tax advantages for those investment funds. He said hedge funds “and many, many private equity funds” are set up to accommodate pension funds and other investors and are not used to avoid taxes. “It makes no sense that we have all these requirements to set up all the entities. We should address the issues for non-profits and pensions, and we should understand why they need these,” Mr. Mnuchin said. “If confirmed, I would diligently look at these things,” he promised.
On taxation of partnerships, Mr. Mnuchin said, “We have to make sure that hedge funds don't use pass-through (provisions) to avoid what would be higher personal income taxes. We've heard this loud and clear on the campaign trail.”
Pressed on whether President-elect Donald Trump's tax reform agenda would favor the wealthy, Mr. Mnuchin promised there would be “no absolute tax cut for the upper class.”
Much of the confirmation hearing focused on Mr. Mnuchin's role as former CEO of OneWest Bank, which bought subprime lender IndyMac during the housing crash and has been faulted for aggressive foreclosure practices. Mr. Mnuchin used the hearing to “correct the record regarding my involvement with IndyMac. Despite the global panic, I saw a way to save the bank,” which under his leadership worked aggressively on loan modifications, he said.