Not a true tax reform bill

Trump adviser: 'This is not a true tax reform bill'

Larry Kudlow, an outside adviser to the president, said in the latest POLITICO Money podcast ‘it’s our turn’ to try stimulating the economy through taxes.

By BEN WHITE

One of President Donald Trump’s top outside economic advisers says the individual side of the GOP tax plan never should have happened and threatens to “hurt a lot of different people.”

“The individual side of this is maybe not the worst thing I’ve ever seen,” said Larry Kudlow, a prominent economic commentator and former adviser to President Ronald Reagan, in the latest POLITICO Money podcast. “But when you end the state and local deduction, because rates are still relatively high, you are going to hurt a lot of different people. So the internal logic was not good and this is not a true tax reform bill.”

Kudlow, who helped design the corporate tax cuts that are the centerpiece of the GOP effort, said the rest of the bill will lift growth and fatten paychecks even if it means higher short-term deficits.

“The sickest part of our tax system is the business side because of international competitive reasons and because of America’s prohibitively high tax rates,” he said. “Profits have been coming in rather well over the last 10 years. But the money is going offshore and that’s really hurt not only investment, it’s also hurt wages.”

Kudlow said he believes the corporate side of the tax plan can raise the U.S. growth rate to 3 or 4 percent even though many budget models suggest the growth impact will be much lower.

But he acknowledged that it’s a risk, adding that the Obama administration tried a spending approach to stimulating the economy and now it’s the GOP’s turn to try supply-side tax cuts.

“Just give us a chance and in three or four years, if it doesn’t work, it doesn’t work; we all go back to the drawing board. I get that. But it’s our turn,” he said.

Kudlow in the interview also spoke of his own transformation — from being a Democrat who opposed the Vietnam War and campaigned alongside Bill Clinton in a 1970 Senate race — into one of the high priests of the view that slashing tax rates is the best way to spur growth.

And he discussed his own brutal battle with alcohol and cocaine addiction, and his now 22-plus years of sobriety. “It was the worst times of my life, really, the late '80s and early '90s where I crashed and burned with alcohol and cocaine,” he said. “Wrecked marriage, wrecked my job and my professional reputation. Those were bad days. Sometimes you really have to hit bottom.”

Kudlow got sober in Minnesota and returned to a life very different from the hard-charging style when he was a top economist at Bear Stearns and other Wall Street firms.

“It was a big turning point for a lot of things, not only to stop drinking and using drugs but to learn a different way of living, to change myself, to develop a sense of faith. I like to joke around that I’m a retired master of the universe. That model didn’t really work for me.”