Donald Trump’s proposed tax plan could increase the national deficit, his Vice President Mike Pence has admitted.
Mr Pence admitted that the US could go into the red "in the short term", adding that if they could not get the economy growing at a rate of 3 per cent "we are never going to meet the obligations that we've made today."
The White House has released a one-page outline of their tax plan, which includes proposals to cut the business tax rate to 15 per cent, eliminate the estate tax and the alternative minimum tax, and reduce the number of tax brackets from seven to three. It will give cut taxes for America’s highest earners by almost 5 per cent.
Treasury Secretary Steve Mnuchin hailed the plan as “the biggest tax cut and the largest tax reform in the history of our country.”
But economists across the political spectrum have questioned its viability.
“We’ve only done the rough numbers, but this looks like a tax cut of a magnitude of about $5 trillion (£3.9 trillion),” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told The New York Times.
The conservative-leaning Tax Foundation estimates the bracket reduction and business tax cut alone would cost the Treasury up to $6 trillion (£4.6 trillion) over the next 10 years.
But Mr Pence told NBC News that any increase in the deficit would be made up for by economic growth.
“We’re going to lower the tax rate to three marginal rates for every American and unleash the bound up energy of the American economy,” he said.
But former Clinton administration budget director Leon Panetta told MSNBC that expecting the tax cuts to pay for themselves through growth is akin to “operating in fairyland.”
Conservative economist Douglas Holtz-Eakin agreed.
“I want a plan that’s focused on growth as much as anyone,” Mr Holtz-Eakin, president of the conservative American Action Forum, told The New York Times. “But these tax cuts are not going to pay for themselves. If you believe that, you’re kidding yourself.”
Mr Trump promised during his presidential campaign that he would grow the American economy by four per cent. But under his leadership, it has turned in its weakest first quarter in three years.
Gross domestic product grew by just 0.7 per cent, compared to 2.1 per cent in the quarter before.