Republicans Say Small Growth Bump Can Offset Lost Tax Revenues

Updated on
  • Some lawmakers leery of way plan will impact high-tax states
  • House plan to cut taxes by $1.5 trillion expected this week

Peterson: Doesn't See Comprehensive Tax Reform

The Republican tax plan, expected to feature sharp reductions to corporate and individual tax rates, won’t raise the U.S. budget deficit over the long term as many economists have forecast, said two Republican lawmakers.

“At the end of the day, this is going to be reducing the deficit because it’s going to get the economy moving,” Senator Rob Portman, an Ohio Republican who serves on the Senate Finance Committee, said on NBC’s “Meet the Press” on Sunday.

Portman, director of the White House Office of Management and Budget for about a year under President George W. Bush, said that raising annual U.S. economic growth to 2.3 percent from 1.9 percent would be enough to start lowering the deficit.

“This is going to change behavior,” he said of the tax plan. “The question is, by how much.”

Wrangling over the details of the sweeping Republican plan, which is expected to include a deficit-busting $1.5 trillion in tax cuts, is in full swing before the House is expected to release its version on Wednesday.

On Saturday, Representative Kevin Brady, the top tax writer in the House of Representatives, said he’ll preserve a popular federal break for property taxes, while a major home builders’ group pulled support after being told that the plan won’t include a tax credit for mortgage interest.

High-Tax States

The latest flare-ups show the difficult path ahead for legislation that Congress and Trump have pledged to deliver by year’s end -- including pushback from Republican lawmakers in high-tax states such as New York, New Jersey and California, where some middle-income voters may pay more, not less, in income taxes.

“This involves the future of my district for years,” said Representative Peter King, a New York Republican whose district covers part of Long Island. King said on Fox’s “Sunday Morning Futures” that he’s “certainly not on board” at the moment. “I’m not going to sign onto anything until the full package is fully examined,” he said.

An estimate by the Tax Policy Center found that the Republican tax framework would reduce federal revenue by $2.4 trillion over a decade and by $3.2 trillion over the following 10 years.

‘Washed Out’

“While the framework’s tax rate cuts would generate new economic activity at first, those growth effects would be washed out in a few years by the effects of higher budget deficits,” the non-partisan think tank said in a blog post on Friday.

Nonetheless, Senator Susan Collins echoed Portman by saying it was “entirely realistic” that a small increase in economic growth would cover the cost of the tax package.

“So far I’m encouraged by discussions I’ve had with members of the Senate Finance Committee,” the Maine Republican said on CBS’s “Face the Nation.” She called for the tax code to be “simpler, fairer and more pro-growth.”

Collins expressed hope that the plan could gather some Democratic support, though Senate Republicans can pass their plan with a simple majority in the 100-vote chamber.

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