Tax cuts Republicans proposed this week will be paid for entirely through economic growth, chief White House economic advisor Gary Cohn said Thursday.
Republicans issued the tax overhaul plan Wednesday that simplifies the tax code, breaking rates down into three categories and cutting corporate rates. The plan also seeks to give companies a break for profits stashed overseas while doubling the standard deduction for most filers.
The tax cuts are projected to cost at least $1.5 trillion and up to $2.2 trillion, according to one analysis. Tax reform, along with reduced regulation and infrastructure spending, was the cornerstone President Donald Trump‘s 2016 election campaign.
Cohn said the cuts won’t increase the budget deficit.
“We think we can drive a lot of business back to America, we can drive jobs back to America, we can make ourselves very competitive,” Cohn told CNBC in a live interview. “We think we can pay for the entire tax cut through growth over the cycle.”
Cohn predicted that economic growth would be “substantially over 3 percent” due to tax reform and deregulation.
The GOP plan proposes lowering the corporate tax rate from the current 35 percent, the highest in the world, to 20 percent. The administration originally had wanted 15 percent, and Cohn said theWhite House will not budge on the 20 percent level.
Lowering the rate will make the U.S. more competitive for development globally, which in turn will drive productivity, wages and employment that will get growth above its sluggish postrecession trend, Cohn said in the interview on “Squawk Box.”
“All of these things lead to higher GDP,” he said. “We think this is very attainable.”
The tax reform plan faces some obstacles in Congress. Criticism has been focused on charges that the proposal gives breaks for top earners but not enough for those at the lower end of the scale.
But Cohn said the provision to double the standard deduction will reduce taxes for working families, which he called a cornerstone of the proposal.
“We have to give everyday hard-working Americans a tax cut,” he said. “This has to be good for American workers, it has to be good for everyday American citizens. If we don’t do that, we haven’t accomplished anything.”