Former Reagan Budget Director David Stockman warns investors not to believe every promise they hear coming from the Trump White House about tax cuts.
For example, Treasury Secretary Steven Mnuchin offered an “absolute guarantee” that President Donald Trump would sign a tax reform bill into law by the end of the year during a recent Politico Money podcast.
Stockman, who was the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan, begs to differ.
“Really, I think the guy is clueless. I think the notion that we are going to have a big, big tax cut is a pipe dream. They can’t pay for it,” Stockman told Fox Business Network.
“In 1981 the debt was only $940 billion… there was plenty of room to have a giant tax cut that was paid for by borrowing. Today they have to find pay-fors, loopholes, [and] base broadeners. They can’t find any," said Stockman, who served as a Republican U.S. Representative from the state of Michigan (1977–1981).
"Even in the state and local tax savings, which allegedly was $1.3 trillion over ten years, is falling by the wayside day-by-day,” he said, adding that “they are going to end up with no tax bill or one that is so minor that it will have very little impact on the economy,” said Stockman.
For their part, Republicans on Thursday muscled a $4 trillion budget through the Senate in a major step forward for Trump's ambitious promise of "massive tax cuts and reform."
The 51-49 vote sets the stage for debate later this year to dramatically overhaul the U.S. tax code for the first time in three decades, cutting rates for individuals and corporations while eliminating trillions of dollars of deductions and special interest tax breaks, Reuters reported.
The tax cuts would add up to $1.5 trillion to the deficit over the coming decade, however, as Republicans have shelved fears about the growing budget deficit in favor of a once-in-a-generation opportunity to rewrite tax laws.
Stockman also is suspicious of the adminstration’s claim that lower taxes will stoke economic growth.
“I don’t believe that for a minute because they are not cutting taxes on marginal rates that are high already… the top rate today is 39.6% and just said we are going to keep the fourth bracket, we are not cutting it at all,” said Stockman.
“I absolutely believe we need a payroll tax cut that will take the burden off of 160 million payroll tax payers, particularly in the middle and lower end, that are getting hit for 15.5% employer, employee—that’s the job killer,” said Stockman.
Meanwhile, Trump, in a series of early morning tweets, praised the Senate's budget passage, saying it is the first step toward delivering "massive" tax cuts.
Trump went out of his way to acknowledge Senate Majority Leader Mitch McConnell, R-Ky. One of his tweets included a short video of McConnell talking up the budget approval. The video later promotes the tax package noting, "Americans need tax reform."
The budget was passed Thursday night by the Senate and allows Republicans to use a procedural maneuver to approve tax legislation with 50 or more votes, The Washington Post noted. In doing so, it eliminates the need for Senate Democrats to support it.
(Newsmax wire services contributed to this report).
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