Alan D. Viard, a tax expert at the American Enterprise Institute, a conservative research organization in Washington, said he and other researchers had repeatedly found
that “deficit-financed tax cuts were usually harmful to growth.”
Cutting the tax on investment income, for example, delivers the most bang for the buck, Mr. Viard said,
but unless the lost revenue is made up through increases in other taxes or spending cuts, the deficit will balloon and economic growth will suffer.
The Trump administration on Tuesday released its 2018 budget, called “A New Foundation for American Greatness.”
The left-leaning Economic Policy Institute estimated that the budget cuts would decrease growth by more than 1 percent by 2020.
Congressional Budget Office
Five-year projections of average
If one assumption has undergirded Republican economic policy for decades —
and is the foundation of the Trump administration’s first budget proposal — it is that tax cuts will unleash fantastic growth.
The Trump administration promises to cut taxes, keep revenues steady and crank out average annual economic growth of 3 percent,
but neither the budget nor the tax reforms previously outlined in sketchy form provide enough detail to figure out if that will happen.
The Trump plan, he said, “could well end up hurting a lot of poor people without boosting growth.”
“If you tilt the tax cuts toward lower-income households, they will spend more of it,” Mr. Behravesh said.
