The White House on Friday promoted US President Donald Trump’s tax cut plan with a forecast of faster US economic expansion and wage growth, but independent analysts said the plan would swell the budget deficit and provide little spark to the economy.
The rival projections reflected the many unknowns swirling around the plan, expected to be unveiled in legislative form on Wednesday. Republicans were still undecided on some of the hardest parts, such as how to pay for the costly cuts proposed.
Weeks and possibly months of debate lie ahead for a project that Trump promised to tackle in his last year’s election campaign.
Photo: AP
Last month, he unveiled a rough framework for cutting taxes. Now he wants the US Congress to approve a bill, which would mark his first major legislative victory, before the end of the year.
The Trump plan for tax cuts of the sort normally reserved for times of economic recession is taking shape in Congress amid signs the economy is already growing briskly.
The country’s GDP increased at a 3 percent annual rate in the July-to-September period, supported by strong business spending on equipment, the US Department of Commerce said on Friday.
The economic recovery begun under former US president Barack Obama after the 2007-2009 recession is in its eighth year and showing little signs of fatigue amid a tightening labor market.
“It’s hard to say that we need to have tax cuts at the individual level ... you don’t need to provide further fiscal stimulus when the economy is already strong,” said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, New Jersey.
Faced with improving economic prospects, Republicans have shifted their rhetoric on tax cuts away from getting the economy moving again to keeping it on an expansion track.
An analysis released by White House economic adviser Kevin Hassett said slashing the top federal corporate tax rate and letting businesses write off the full cost of most capital investments immediately, as proposed in the plan, would bring faster growth and higher wages.
Hassett’s projections envisioned a 3 to 5 percent increase in GDP that, over 10 years, could represent an additional US$700 billion to US$1.2 trillion in economic output.
However, the Tax Policy Center, a non-profit Washington think tank, released an analysis that concluded the Trump tax plan would not produce a significant, permanent economic boost.
The group said the plan would reduce federal tax revenue by about US$2.4 trillion over the next decade and by more than US$3 trillion in the decade after that, adding significantly to a US national debt that already exceeds US$20.4 trillion.
US Representative Kevin Brady, chairman of the US House of Representatives Ways and Means Committee, said progress was being made toward satisfying Republicans who have held back support for the tax plan because it could end a deduction for state and local taxes.
“I’m hopeful ... we can find a good solution for them,” Brady said.
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