A senior White House official said Republicans’ plans to extend or expand the 2017 temporary tax cuts would likely come at the expense of ordinary Americans.
“While Republicans in Congress have not specified how they will finance this round of tax cuts, every major Republican tax cut for the wealthy and corporations in recent decades has placed the burden on middle- and low-income Americans, and this one time it will be no difference,” Lael BrainardDirector of the White House National Economic Council said this on Wednesday.
Brainard spoke on a conference call with reporters ahead of a planned meeting Thursday between presumptive Republican presidential nominee Donald Trump and Republicans in Congress. Trump is expected to discuss legislative priorities in the event he wins and Republicans control Congress.
Republicans on Capitol Hill have already discussed how they would use a process called budget reconciliation to bypass the filibuster in the Senate and push through some potential priorities.
About $4.6 trillion in tax cuts — mainly in the form of lower individual tax rates and more generous deductions that Republicans passed in 2017 — will expire in 2025, according to the nonpartisan Congressional Budget Office. Brainard’s NEC has upped the tab, at $4.9 trillion.
Republicans are eager to extend the temporary tax cuts, and Trump has talked about cutting corporate tax rates even further. But it is not clear how, or even if, these changes would be paid for to prevent the budget deficit from growing.
Brainard told reporters there are four likely ways the Republican Party would try to offset at least some of the costs. She said they can use the revenue from the 10% blanket tariff Trump has proposed on imported goods; they could cut back on entitlement programs like Social Security and Medicare; they could cut annual spending on federal agencies and programs other than defense; or they can simply borrow, adding the cost of the tax cuts to the national debt.
The tariffs, Brainard said, would cost an average household about $1,500 a year in higher prices as importers pass the cost of the tariffs on to consumers. Cutting the agencies’ annual budgets would mean a spending reduction of at least 50%, she said.
“One way or another, the American people will pay the price for the Republican approach to Congress,” she said.
President Joe Biden has said he will keep tax cuts in place for households making less than $400,000 annually. Brainard said Biden would increase revenues by allowing the other temporary tax cuts to expire as planned for people above the $400,000 threshold, and that he would raise taxes on corporations and strengthen IRS enforcement, which would also increase revenues.
Brainard said letting some of the tax cuts expire would have an economic impact, but not a big one.
“We think the effect on the economy will be benign,” she said.
