Trump also wants to apply the same rate to certain pass-through businesses, such as S corporations and partnerships, which don't pay taxes themselves, but pass their earnings through to their owners, who pay taxes at their individual rates, Mnuchin said. However, he said “service companies that are pass-throughs will not get the benefit of the rate.”

“If you earn money that's clearly income, if you're an accountant firm and that's clearly income, you'll be taxed at income rates—you won't be taxed at pass-through rates,” Mnuchin said. “If you're a business that's creating manufacturing jobs, you're going to get the benefit of that rate because that's going to be passed through to help create jobs and better wages.”

Mnuchin also repeated that Trump is committed to eliminating the special tax treatment of carried interest, but not for all the investment firms that make use of it. “The president's been very clear that hedge funds will not have the benefit of carried interest,” he said. But other firms— “entities that do create jobs,” Mnuchin said—may still qualify.

Carried interest is the portion of an investment fund's returns that are paid to investment managers. It's currently taxed as capital gains, at rates as low as 20%. The top individual income tax rate is 39.6%, though Trump and congressional Republicans have proposed cutting it to 35%.

Trump is planning an aggressive travel schedule, taking him to as many as 13 states over the next seven weeks, to sell the idea of a tax overhaul as the administration tries to avoid repeating the communications failures of its attempt to repeal Obamacare. However, Republican leaders have yet to unveil details of what Trump has called a “massive” tax regime change, including such basic matters as where to set the corporate tax rate and how to set up individual tax brackets. Mnuchin and Short both said details will come later this month.

'Pretty Close'

The White House and members of Congress are “pretty close to finalizing” a bill and have settled many of the disagreements that divided their effort early in the process, Short said. The White House is wary of relying solely on Republican support for the legislation after seeing the health care bill collapse and is genuinely seeking Democratic support, Short said.

While the president is eager for a bipartisan tax deal—and his tax tour will visit states where Democrats hold Senate seats—Mnuchin said that if needed, the administration will encourage Republicans to use the reconciliation process to get to 60 votes. That would allow them to bypass a Senate filibuster and pass a bill on a partisan basis.

Mnuchin also said that he is considering backdating any tax changes to Jan. 1 of this year, which “would be a big boon for the economy.”

While Trump is committed to a permanent tax overhaul, Mnuchin has at times appeared to be managing down those expectations. “As I said this is a pass-fail exercise. Passing tax reform, which hasn't been done in 31 years, that's a win,” the Treasury chief said, adding that stock markets have a “built-in” expectation of success.

Trump last week cut a short-term debt ceiling and government spending deal with Democrats to clear the deck for a major tax bill, but the agreement could complicate tax efforts by sowing doubt among the GOP about its unpredictable president. As Mnuchin worked to sell an 18-month debt-ceiling increase to Republicans and Democrats during a meeting in the Oval Office last week, Trump abruptly decided to go for a three-month increase in line with what Democrats wanted.

“We could have done a one-year deal, this wasn't widely reported, on the debt ceiling,” Mnuchin said Tuesday. “But the president wants to raise military spending. That's one of his main priorities, particularly in the mix of what's going on in North Korea and other areas. The president wants to increase military spending and that's something he is going to demand for December.”

Bloomberg News

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.