Tax Reform And The Deficit: Vice President Mike Pence Admits Reducing Rates Will Swell Budget Hole

Vice President Mike Pence acknowledged Sunday President Donald Trump’s proposed tax overhaul could swell the U.S. budget deficit and depends on future growth of the economy to offset the numbers.

In an interview on NBC’s “Meet the Press,” Pence said tax reductions are the best way to spur the economy, and any increase in the deficit would be “short term.”

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“The only way to meet obligations that we face in deficits today, or long-term obligations in our entitlements … is through growth,” he said. “If we don’t get this economy growing at 3 percent, or more as the President believes we can, we’re never gonna meet the obligations that we’ve made today.”

The administration released a one-page outline on tax reform last week that would slash the corporate tax rate to 15 percent from 35 percent and cut the number of tax brackets to three. Critics described the document as a windfall for the wealthy, but the document was light on details. They also said Trump should release his tax returns so Americans can see how the revisions would affect his bottom line.

House Minority Leader Nancy Pelosi, D-Calif., tweeted last week the plan would have cut Trump’s $38 million 2005 tax bill by $30 million.

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PolitiFact said based on the information currently available, Pelosi basically is correct. Part of Trump’s 1995 state return was leaked to the New York Times and the summary pages from his 2005 federal return were leaked to MSNBC.

Trump’s plan would eliminate the alternative minimum tax. His 2005 return shows he paid more than $31 million that year because of the AMT. Without that requirement, Trump would have paid just $5.3 million, PolitiFact said.

Pelosi said, however, that doesn’t mean there isn’t room for negotiation. She said on ABC’s “This Week” though the proposed 15 percent corporate tax rate is too low and the current 35 percent is too high, “we could split the difference.”

“We said we would work on a tax reform for fairness and transparency,” Pelosi said. “But what did he put out? … A wish list for billionaires.”

White House Chief of Staff Reince Priebus said the tax reductions actually would be offset by the elimination of loopholes and deductions, resulting in little change in the amount the wealthy pay.

“This is a targeted tax deduction for the middle class,” Priebus said on ABC’s “This Week.” “It's also targeted at attracting business in this country and making sure that businesses can pass on savings to their employees so people can put more money in their pocket, they can enjoy the American dream.”

In an interview that aired Sunday on CBS’s “Face the Nation,” Trump said again he would not release his tax returns until the Internal Revenue Service finishes auditing him.

“I’m under routine audit. It’s a very unfair thing. I’ve been under audit since I became famous,” Trump complained.

As for his tax plan, Trump said it would be paid for not only through economic growth but through revisions to U.S. trade agreements. He said he would like to see reciprocal taxes on countries that tax U.S. exports.

“We’re going to have a very wealthy country again,” Trump said.

Among the first moves Trump made upon taking office was pulling out of the Trans-Pacific Partnership. Last week he directed the Commerce Department to review the North American Free Trade Agreement with an eye toward renegotiating it after speaking with both Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto.

"I got a very nice call from Justin Trudeau, the prime minister of Canada. I was all set to do it [pull out of NAFTA]. In fact, I was going to do it today. I was going to do it as we're sitting here,” Trump said, adding, "If I'm not able to renegotiate NAFTA, I will terminate NAFTA."