Trump tax plan to rely on future U.S. growth to fund cuts: officials

Thu Apr 20, 2017 8:45pm EDT
 
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By David Morgan

WASHINGTON (Reuters) - 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.   Continued...

 
U.S. President Donald Trump  in Washington, U.S., April 20, 2017. REUTERS/Kevin Lamarque