A senior White House official said that Republicans’ plans to extend or expand the temporary tax cuts put in place in 2017 would likely come at the expense of ordinary Americans.
“Although congressional Republicans haven’t specified how they’ll finance this round of tax cuts, every major Republican tax cut for the wealthy or corporations in recent decades has put the burden on middle- and low-income Americans, and this time will be no different,” Lael Brainard, director of the White House’s National Economic Council, said Wednesday.
Brainard was speaking during a teleconference with reporters, ahead of a scheduled meeting Thursday between presumptive GOP presidential nominee Donald Trump and congressional Republicans. Trump is expected to discuss legislative priorities in the event that 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 possible priorities.
According to the nonpartisan Congressional Budget Office, about $4.6 trillion in tax cuts ― mostly in the form of lower individual tax rates and more generous deductions enacted by Republicans in 2017 ― are set to expire in 2025. Brainard’s NEC has put the tab higher, at $4.9 trillion.
Republicans would like to extend the temporary tax cuts, and Trump has talked about lowering corporate tax rates even further. But it’s not clear how, or even if, those changes would be paid for to keep the budget deficit from growing.
Brainard told reporters there are four likely ways the GOP would try to offset at least some of the costs. She said they could use revenues from the 10% across-the-board tariff Trump has proposed on imported goods; they could cut entitlement programs like Social Security and Medicare; they could cut annual spending by federal agencies and programs excluding defense; or they could simply borrow, adding the costs of the tax cuts to the public debt.
The tariffs, Brainard said, would cost a typical household about $1,500 annually in higher prices as importers passed on the costs of the tariffs to consumers. Cutting annual agency budgets would mean spending reductions of at least 50%, she said.
“One way or another, the American people will pay the price for the congressional Republican approach,” she said.
President Joe Biden has said he would keep tax cuts for households earning less than $400,000 annually. Brainard said Biden would raise revenues by allowing the other temporary tax cuts to expire as scheduled for people over the $400,000 threshold, and that he would raise taxes on corporations and beef up IRS enforcement, which would also raise revenues.
Brainard said that letting some of the tax cuts expire would have an economic impact, but not a big one.
“We think the effect on the economy would be benign,” she said.
