White House officials are scrambling to produce an election year fiscal stimulus plan that is likely to include tax cuts to juice the economy and stock market ahead of the 2020 presidential contest, FOX Business has learned.
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The stimulus would be a way to have an alternate message to the proposals from nearly every Democratic candidate looking to unseat Trump in the November election. Top-tier democrats are proposing massive increases in the size of government, with programs like Medicare for all, coupled with tax increases that will likely fall on the middle class.
These people say Larry Kudlow, Trump’s director of the National Economic Council, is leading the effort. He and his team are weighing the proposals and they are consulting with members of Congress on the appropriate package of tax cuts. The measures being discussed with Congressional leaders include options like increasing the earned income tax credits, which is a subsidy targeted at lower-income workers with families, and cutting corporate and individual tax rates, these people say. There has also been talk of proposing payroll tax cuts, Congressional sources tell FOX Business.
These sources add that the tax-cut proposal could be part of the White House budget, to be submitted in February even if getting a tax-cut plan through a divided Congress may be difficult during an election year.
Still, people with direct knowledge of the matter say the White House will likely want to showcase a tax-cut proposal — particularly one that targets the middle class — as a way of contrasting the fiscal policies advocated by most Democrats looking to oust President Trump. Leading Democratic candidates are proposing massive increases to the size of the federal government, including payroll tax increases, which affects all wage earners, not just the rich.
On Wednesday, FOX Business was first to report that the Trump administration would be proposing some sort of fiscal stimulus involving tax cuts. The report sparked a stock market rally that morning with the Dow Jones jumping almost 100 points.
In an interview on Wednesday, Kudlow confirmed to FOX Business’ Liz Claman that such a plan is in the works.
“The president directed me to produce what we’re calling tax cuts 2.0,” Kudlow said. “It will be published some time during the campaign, as a message for future Trump economic growth policies, particular emphasis on the middle class, in his second term. . . We are looking at a variety of tax cuts, sometimes making permanent some existing tax cuts, some existing corporate tax cuts.”
Kudlow said he is working with people inside the administration as well as Rep. Kevin Brady, R-Texas, the lead Republican on the House Ways and Means Committee. People with direct knowledge of the matter describe Kudlow as the administration’s point-man on the tax-cut plan and that he and his team will be drafting the final stimulus package.
It is unclear when the plan would be presented. In the FOX Business interview, Kudlow said, “There are no specifics.”
A White House spokesman declined comment.
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Markets have been swelling since Trump was elected in 2016, spiking initially on his plans to cut taxes and loosen regulations. In 2017, Congress passed the Tax Cuts and Jobs Act which took corporate taxes down to 21 percent from 35 percent and reduced most individual rates, which further boosted stocks even as concerns over a trade war, particularly with China, dampened stocks until recently when the Trump Administration announced a trade-war truce with Bejing.
But Democrats running against Trump — including Massachusetts Sen. Elizabeth Warren, Vermont Sen. Bernie Sanders, former Vice President Joe Biden and South Bend, Ind., Mayor Pete Buttigieg — have all announced plans to expand federal spending and raise taxes.
People close to the Trump campaign believe the tax cut proposals could also help spur the markets and the economy on the prospect that a second term will include additional stimulus.
Some Wall Street executives said they found it odd that Kudlow and the White House would be planning a fiscal stimulus in the face of what appears to be a booming economy and low unemployment. Those executives think that a stimulus would not be planned unless they believed there was a good chance an economic slowdown might occur as the 2020 race heats up.
“Despite very low interest rates, the US economy is showing some signs of weakness, particularly in manufacturing and CEO confidence,” Charles Myers, Chairman of Signum Global Advisors tells FOX Business. “The White House preparing a package of fiscal stimulus is not surprising, therefore, as they don’t want to take any chances heading into the November election.”