Treasury Secretary Steven Mnuchin said Thursday the White House is working on another round of tax cuts for the middle class, even as the budget deficit continues to grow.
“The president has asked us to start working on what we call ‘tax 2.0,’ and that will be additional tax cuts,” Mnuchin said in an interview with CNBC at the World Economic Forum in Davos, Switzerland. “They’ll be tax cuts for the middle class, and we’ll also be looking at other incentives to stimulate economic growth.”
Both President Donald Trump and White House Economic Adviser Larry Kudlow have hinted at more tax cuts in the past several months. During a Congressional Republican retreat in September 2019, Trump said he is working on a “very substantial tax cut” that he called “very, very inspirational,” but he didn’t provide any further details.
Kudlow was fairly vague on how the tax cuts would work and basically admitted they were an incentive for Trump’s reelection during a Fox Business interview last October.
“Is it kind of a campaign issue: Vote for me and you’ll get tax cuts in the second term?” host Stuart Varney asked at the time.
“I wouldn’t put it exactly that way,” Kudlow replied. “But what I was saying is this: The president would love to see another round of lower taxes to help middle-income workers and wage earners, give them as much disposable income as possible.”
Details are slim, but some ideas have been proposed including cutting the tax rate to 15%. Other proposals include changing how capital gains are taxed, or reducing the number of tax brackets from seven to three or four, according to former Trump Federal Reserve nominee Stephen Moore, who helped write the 2017 Tax Cuts and Jobs Act.
The announcement of more tax cuts come at a time when the U.S. budget deficit ballooned to more than $1 trillion for 2019 — and is projected to be above $1 trillion for the next decade at least. Trump promised during his campaign to wipe out the government debt, but instead it has eclipsed $23 trillion.
But Mnuchin was steadfast in his argument that tax cuts would pay for themselves over 10 years while also acknowledging that current spending levels are unsustainable.
“There’s no question that we need to slow down the rate of growth of government spending because we cannot sustain these deficits growing at these levels,” Mnuchin said.
Trump’s first round of tax cuts were targeted more toward businesses, cutting the corporate tax rate from 35% to 21%, but Mnuchin said this next round will in fact help the middle class more.
“The president feels that we need to continue to incentivize the middle class, that their taxes have been too high historically,” Mnuchin said. “We’ve had big tax cuts already, and that’s an area that we’ll continue to look at.”
There is no timetable for when these tax cuts would actually be proposed at this time, but as the 2020 election season ramps up, it would not be a surprise to see “Tax 2.0” appear more and more in the news cycle.