Trump Tax Plan To Rely On Future U.S. Growth To Fund Cuts: Officials

Trickle-down is back!

U.S. President Donald Trump’s tax reform plan will rely largely on future revenue gains from faster economic growth to justify major tax cuts, top Trump advisers said on Thursday.

As Trump’s first 100 days in office draw to a close, the disclosure is the latest sign that the White House could part ways with congressional Republicans who want to pay for tax cuts by taxing imports and eliminating a business tax deduction for debt interest payments.

“Some of the lowering in (tax) rates is going to be offset by less deductions and simpler taxes,” Treasury Secretary Mnuchin said in a question-and-answer session on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington.

“But the majority of it will be made up by what we believe is fundamentally growth and dynamic scoring,” he added.

Dynamic scoring is a little-known government forecasting method that uses economic modeling to predict changes in revenues resulting from economic growth spurred by new tax and economic policies.

Republicans believe major tax reform would drive annual U.S. economic growth above 3 percent. But if anticipated improvement fails to materialize, the strategy could rob the Treasury of tax revenue and saddle the economy with bigger deficits and higher debt burdens.

Mnuchin said dynamic scoring could give Trump and Congress a $2 trillion revenue cushion for the first major overhaul of the U.S. tax code since 1986.

Gary Cohn, director of Trump’s National Economic Council, told the same gathering that dynamic scoring would help avoid deficit-funded tax cuts that could not be made permanent under Senate fiscal rules.

“Using dynamic scoring may allow us to get to a permanent solution,” Cohn said. “We would like a permanent solution.”

A congressional tax plan backed by House of Representatives Speaker Paul Ryan would raise over $2 trillion with a border adjustment proposal to tax imports while exempting exports from taxation, and by eliminating net interest deductions for businesses. But both measures have fierce opponents among businesses and Republican lawmakers.

Mnuchin said border adjustment could hurt U.S. exports by driving the dollar higher, or fuel consumer inflation if the dollar does not rise.

The administration’s goal is to unveil a plan soon that can quickly pass the House and Senate.

“This won’t take ‘til the end of the year,” Mnuchin said. “It will be sweeping, it will be significant and it will create a lot of economic growth.”

(Additional reporting by Lindsay Dunsmuir and Jason Lange; Editing by Jonathan Oatis)

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