Fed's Kaplan: Tax reform a plus, but higher debt may stifle US growth

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Why this Fed President is concerned about tax reform

Federal Reserve Bank of Dallas President Robert Kaplan on his views of the GOP tax plans.

Dallas Federal Reserve Bank President Robert Kaplan on Friday said he is concerned about some of the elements of the GOP’s tax bill, which finances tax cuts by increasing debt.

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“In terms of growing the economy, I’ve said I think regulatory review if it’s thoughtfully done would be helpful. We’re underspent on infrastructure. And yes, I have talked about the fact that tax reform – if it’s reform – which encourages businesses to be more likely to locate in the United States, to do capital spending in the United States, to hire and build their businesses here, I think that could be positive,” Kaplan told FOX Business’ Maria Bartiromo.

House Republicans passed tax reform legislation Thursday afternoon. The bill would slash the corporate tax rate, cut taxes for individuals and reduce the number of tax brackets.

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Kaplan said the tax reform elements that create sustainable changes in behavior and investment can boost the U.S. economy. However, higher debt could present a roadblock for sustained long-term growth.

“The reform elements I think could be helpful but the parts that create a short-term stimulus, or tax cut financed by increasing the debt, my concern is that may actually create a financial headwind for economic growth and not improve sustainable economic growth in the United States. So that’s the ‘watch out’ and that’s the issue,” he said.

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