The U.S. has seen improved economic growth this year with GDP expanding at a 3.1% rate in the second quarter and third-quarter GDP revised up to 3.3%, the highest in three years. The November jobs report added to the positive economic sentiment, adding 228,000 jobs this month. Tax reform is also poised to boost the economy even more as lawmakers in the Senate and House work to reconcile the two bills.
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But one potential sticking point in the tax reform negotiations is the proposal to eliminate the state and local tax (SALT) deductions which could deal an economic blow to high-tax states such as New York and California by potentially raising taxes on some high-income individuals.
National Economic Council Director Gary Cohn weighed in concerns over the potential elimination of the SALT deduction, telling the FOX Business Network’s Stuart Varney, “In the conference we are open to other solutions, you know, as we’ve made it clear to you. The White House laid out a broad brush outline of principles with the group of six, the President’s had very few bright lines here and he’s been very flexible on everything else. There are some fixes that the House and the Senate are working on for the SALT states.”
But Varney pointed out a Wall Street Journal editorial proposing that one way to fix the problem for high-tax states is to lower the top income tax rate even more, suggesting, “If you brought it down to 35%, you’ve fixed the problem.”
According to Cohn that is an option the president is open to.
“The president is not opposed to bringing the top rate down.”
But Cohn cautioned that the administration doesn’t want it to impact efforts to lower the corporate tax rate as well, in an effort to drive wage growth.
“Maybe we can do both of those, maybe we can keep the corporate rate down and drop the top [income tax] rate,” he added.
Varney then asked Cohn his thoughts on former President Obama’s recent comments trying to take at least some of the credit for the economic growth during the first year of the Trump administration.
“Look at what President Trump has done and I could go on for a while here. We’ve had two consecutive quarters of over 3% GDP, we’re going to have a third quarter of over 3% GDP.”
Cohn then compared the state of U.S. manufacturing jobs under the Obama administration versus the Trump administration.
“We’ve created, since President Trump got elected, 16,000 manufacturing jobs every month. Last year in the Obama administration for the year they lost 16,000 manufacturing jobs.”