(Bloomberg) The top Democrat on the tax-writing Senate Finance Committee said a bipartisan tax deal is impossible if Treasury Secretary Steven Mnuchin can’t commit to an overhaul that avoids giving the highest-earning Americans a tax cut.

“We will not get bipartisan tax reform when the Secretary of Treasury walks back a pledge to have no absolute tax cuts for the wealthy,” Ron Wyden, an Oregon Democrat, said Tuesday during a Senate Budget committee hearing.

Democrats have signaled during previous hearings that they aren’t likely to cooperate with the GOP’s tax plans—and Senate Republican leaders have said they’re planning to pass legislation with only their own party’s votes. The GOP controls 52 of the Senate’s 100 votes.

Treasury Secretary Steven Mnuchin speaks during a discussion at the U.S.-China Business Council annual meeting in Washington, D.C.
Treasury Secretary Steven Mnuchin speaks during a discussion at the U.S.-China Business Council annual meeting in Washington, D.C. Andrew Harrer/Bloomberg via Getty Images

But using a partisan approach would mean that the White House and GOP lawmakers must either find ways to offset rate cuts for individuals and companies with revenue raisers or settle for only temporary changes. Under Senate rules that would allow for a party-line vote, any provisions in a tax bill that would increase the long-term deficit would have to be set to expire.

Last year, Mnuchin said during an interview on CNBC that Trump’s tax plan would benefit the middle class and offer no absolute cut to the upper class—because any rate cut for high earners would be offset by ending other tax breaks that they use often.

While tax experts have questioned whether that’s possible, Wyden seized on the statement to coin the phrase the “Mnuchin Rule.” During a separate hearing Monday, Mnuchin said his comments about avoiding cuts for the wealthy were an objective—not a firm rule.

Walking it Back

“I have walked it back from my CNBC interview,” Mnuchin said Tuesday. The Treasury chief said he and the president are focused on reaching agreement with congressional leaders now.

“Our focus is on getting tax reform done—to get tax reform done it’s my job to figure out what meets the president’s objective, what meets the House and the Senate so that we can get something signed into law and there will be compromises along the way,” Mnuchin said.

While Trump has yet to release full details of his tax plan, he pitched it during his campaign and since as a tax cut for the middle class. The plan calls for reducing the number of individual tax rates to three, and cutting the top rate to 35 percent from 39.6 percent—a change that would represent a major tax cut for the highest earners.

Under the plan, so-called pass-through businesses—including partnerships and limited liability companies—would pay the same 15 percent tax rate that Trump has proposed for corporations, which would financially benefit not only mom-and-pop shops but also big partnerships like law firms and business empires like his own.

Budget Window

Mnuchin said during the hearing that he would consider allowing a longer time horizon for tax cuts that would add to the deficit—a change being pushed by Senator Pat Toomey, a Pennsylvania Republican. Current rules require that cuts would have to expire if they add to the deficit beyond 10 years; Toomey has suggested expanding that to 20 or 30 years.

“I am hopeful that we can still get some bipartisan support,” Mnuchin said in response to a question from Toomey. “But as you said, if we can’t, reconciliation is an alternative and I look forward to working with you and the Senate on ideas such as a 20-year window as opposed to a 10-year window to explore that.”

The Treasury secretary also said that the budget would be updated with revised projections once there are more tax plan details—and the administration has “no intention” of double counting economic growth benefits twice.

Bloomberg News