A top economic adviser to President Trump on Tuesday said the GOP’s tax cuts will ultimately have to “prove themselves,” but predicted that changes to the corporate side alone can eventually help offset an initial $1.5 trillion revenue hit from the planned overhaul.
Kevin Hassett, chairman of the Council of Economic Advisers, also waved off recent analyses of the GOP plans forecasting long-term tax hikes on some individuals and modest economic growth, saying they’re relying on incomplete data.
Mr. Hassett told reporters that the analyses tend to be “less flattering” for years far out in the future, after certain provisions aimed at the middle class are slated to expire.
“I think it’s the intent of everybody involved [in] the process that [the] tax reductions eventually become permanent,” Mr. Hassett said on a conference call organized by the National Taxpayers Union.
“But it’s appropriate that they have to prove themselves too, which is I think part of the process,” he said. “The fact is that if you look ahead 10 years or 15 years to what economic policy is going to be, that even if they do make it permanent then there’s a chance that some other government could come in and reverse it.”
The CEA published a recent report that found the corporate tax changes in the plans, which also allow businesses to immediately deduct capital expenses, could increase gross domestic product by between 3 percent and 5 percent in as little as three years.
Mr. Hassett said working off projections that GDP will hit $28 trillion in 10 years, a 5 percent increase could come close to making up the initial cost of the tax legislation, which some fiscal watchdog groups have pegged at closer to $2 trillion.
The Tax Policy Center on Monday released a study that showed the House-passed plan would give a more modest boost to the economy in the short and long-term, and that associated growth would only recoup about 10 percent of the revenue immediately lost from cutting rates.
The center also released an analysis of the Senate plan showing it would reduce taxes on all income groups in the short to medium term, but that the largest tax cuts would go to wealthier Americans and those with lower incomes would see a modest tax increase by 2027.
Mr. Hassett said he couldn’t speak for the Treasury Department, but that his office doesn’t plan to put out a detailed distributional analysis of who benefits from the plan along the lines of what such outside groups have released.
“It’s not a traditional role of the CEA to provide scoring of things that the career staff doesn’t have the model [for],” he said. “Our role is to provide objective advice about the impact…on the economy, not to be a scoring authority.”
The House and Senate plans both slash the corporate tax rate from 35 percent to 20 percent and cut tax rates for individuals across the board, while eliminating various exemptions like the deduction for state and local income taxes paid.
But in order to comply with budget rules limiting the cost of the overall package to no more than $1.5 trillion, House tax-writers put an expiration date on certain provisions, such as a new family credit.
The Senate plan, which could be up for a floor vote next week, goes even further in that regard, winding down all of its individual tax cuts after 2025.
But Republicans say they don’t intend to let the temporary provisions expire, and that the package as a whole will supercharge the economy by growing jobs, boosting wages, and making U.S. companies more competitive with their foreign counterparts.
Rep. Jason Lewis, Minnesota Republican, said on the call that House budget-writers actually assumed a 2.6 percent growth rate in their most recent fiscal blueprint and that the tax plans could certainly push things higher.
“If we can grow at 4, 5 percent over the next few years, the rest of the politics will take care of itself and we’ll have done the right thing,” Mr. Lewis said.
He did acknowledge, though, that there there could be perception problems as Republicans in both chambers kick their public lobbying efforts on the plans into high gear.
“I do think the optics are a little difficult in making [corporate] permanent, which I certainly support, but not making the individual cuts permanent,” he said.
Pete Sepp, president of NTU, said groups like his are going all-out to get legislation across the finish line after 30-plus years since the last major overhaul
“We’re investing these resources because this is the debate we have been waiting for for the better part of three decades, and it’s that important to us,” he said.
He said they’re already up with television ads in the home states of GOP Sens. Lisa Murkowski of Alaska, Susan Collins of Maine, and Bob Corker of Tennessee as part of the push and are hoping to expand on those buys.
Those senators and several other Republicans in the upper chamber have expressed varying levels of discomfort with the legislation as it stands now — and are facing similar pressure on the other side.
The “Not One Penny” campaign is targeting GOP senators like Mrs. Collins and Dean Heller of Nevada urging them to vote no.
“Senator Heller should listen to his constituents, not the demands of lobbyists or his rich campaign donors, and vote against this bill,” spokesman Tim Hogan said Tuesday.