White House says tax cuts could add $1.2T to US economy

GOP continues debate on 401(k)s ahead of tax cut deadline

Rep. David Schweikert (R-Ariz.), a member of the House Ways and Means Committee, discusses the GOP’s tax cut plan.

President Donald Trump's top economist is doubling down on claims that corporate tax cuts would spark rapid economic growth and boost incomes.

Kevin Hassett, chairman of the White House Council of Economic Advisers, released a 41-page report on Friday detailing the possible benefits from the administration's goal of slashing the corporate tax rate from 35 percent to 20 percent. The report estimates the reduced rates for businesses could increase the size of the U.S. economy by $700 billion to $1.2 trillion over a decade, while causing average household income to eventually surge by $4,000 annually.

Democratic lawmakers and many economists are doubtful that Trump's tax cuts can deliver the boosts suggested by Hassett. They have said that Hassett cherry-picked his evidence and that most of the benefits from corporate tax cuts would go to wealthy investors rather than middle-class workers.

"This is their latest installment of trickle down fairy dust," said Jared Bernstein, a senior fellow at the liberal Center on Budget and Policy Priorities and a former economics adviser in the Obama administration.

<3>More from FOX Business

Any 401(k) changes in the GOP tax cuts would only 'make them bigger': Rep. Brady

U.S. economy bouncing back, tax reform may be icing on the cake

Martin Sorrell predicts bullish market ahead of GOP tax cuts

Bernstein stressed that he sees benefits from a smart redesign of the corporate tax code that lowered rates and closed loopholes. But the Trump plan, he said, is assuming unrealistic gains. The framework backed by the administration and Congressional Republican leaders puts more emphasis on cutting taxes for companies and could increase the budget deficit, which would possibly hurt long term economic growth.

Hassett said in a phone call with reporters Friday that he's "optimistic" that the possible economic growth generated from the plan will mean "it won't significantly add to the deficit" and could be revenue neutral after 10 years. His argument is that lower corporate tax rates would lead to more investments by companies in equipment and workers, which would increase productivity and incomes.

The White House report separately suggested that lower corporate rates could reduce the U.S. trade gap, since companies would have less of an incentive to book their profits overseas. The possible benefits of this weren't included in the reports estimated income growth, but the result would be faster growth for the U.S. gross domestic product. In the accounting for GDP, trade deficits subtract from growth.

Adam Looney, a senior fellow at the Brookings Institution and former Obama-era Treasury Department official, said that any additional gains would largely be contained in the GDP figures, since the amount of money being invested in the United States would not change much.

"Those are purely accounting measures, not real changes," Looney said. "It would be using a different yardstick."