Economist Larry Kudlow told Newsmax on Wednesday that he disagreed with reports that White House chief strategist Steve Bannon is pushing a 44 percent tax rate for Americans earning more than $5 million a year, urging instead to "go heavy on the deductions."
"If you want a populist message, don't raise the rate," Kudlow, among several Trump campaign advisers on economic issues, told Newsmax in an exclusive interview. "Get rid of the deductions.
"Steve Bannon is a dear friend," he added. "I admire him immensely, but I don't agree with him."
Citing "three people who've spoken to him recently," The Intercept reported that Bannon, was urging the 44 percent rate for wealthy taxpayers as part of the administration's tax-reform package.
The current top U.S. tax rate is 39.6 percent – and President Donald Trump has discussed a plan consisting of only three rates, with the top falling to 35 percent.
Bannon, 63, has long described himself as an "economic nationalist" and has touted that position on Breitbart News, where he was executive chairman before joining the Trump campaign last year.
Kudlow told Newsmax that a tax-reform proposal was expected to be introduced Friday by the Republican "Gang of Six," two members each from the House, Senate and White House.
He predicted that Bannon's idea would not be in the plan, though he said he suspected that the proposal would have "many fewer deductions."
"Punishing successful people with higher tax rates is not a good policy," Kudlow said. "It will not help the economy.
"It probably will hurt the economy," he added. "You don't get the revenues."
Kudlow said a 44 percent rate would drive wealthy earners into "tax avoidance" – putting their money in tax shelters that include municipal bonds and off-shore investments.
"The top earners will look to ways to avoid taxes and will invest in non-productive ways – and it never works."
He reiterated the importance of eliminating deductions for higher-income earners, while lowering the overall tax rate.
"Take their deductions away. Eliminating deductions is good policy," Kudlow told Newsmax.
"If you lower the tax rate and eliminate the deductions, you will get more investment and higher revenues – and that will strengthen the economy.
"You will have an incentive for investing productively – and investors will move away from tax avoidance."
Kudlow – an admitted "flat-tax man," a 20 percent rate for everyone with no deductions – said he talked tax reform with Bannon at the White House just last week.
"He was talking about 42 percent then," he told Newsmax. "I tried to talk him out of it.
"Now, I read that it's 44 percent. I guess I wasn't too persuasive," Kudlow said, laughing.
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