Kevin Hassett, the chairman of the Council of Economic Advisers, says a tax cut like the one President Trump is proposing could potentially lift wages by about $4,000.
Hassett spoke at The Hill‘s event on tax reform at the Newseum in Washington, D.C., on Wednesday and said wages have been stagnant for too long and the president's framework for tax reform would help Americans earn higher wages.
Recent Stories in Issues
"Over the last eight years the average real income growth was only about 0.6 percent per year," Hassett said. "That's just not fast enough. If you have the sense that America's workers aren't keeping up, it's because they haven't been."
"What President Trump wants the team to do is come up with a plan that fixes that, and we know that profit growth over that same time is almost 11 percent per year. And so it used to be that profit growth went up 11 percent, then we'd expect wages to go up 11 percent, but instead profit growth went up 11 percent and wages hardly budged."
Hassett says President Trump's tax reform framework will fix that and lift wages for Americans by as much as $20,000.
"The truth is that a tax cut like this very conservatively will increase the median wage by about $4,000 a year over a relatively short time," Hassett explains. "If you look at some of the more optimistic estimates of the literature and then run the thing over time you could be looking at $10,000, even $20,000 higher wages relative to baseline, and that's the message of this tax reform."
"Wage growth has not nearly been good enough," he said. "If we bring the profits back here, then wage growth would go back to being what it should be."
Hassett said the tax reform framework was designed in a way so that it would pass, demonstrating Trump's leadership in putting a plan together. "It started with the Big Six negotiating the outline for the framework, but also thinking about constructing a process that maximizes the chance that tax reform would actually pass."
"They sent instructions up to the Hill that were pretty flexible in terms of they can move brackets where they need to in order to get the deficit exactly where they want; they're even willing to consider a higher top rate than 35 percent at some income above that if that's what it takes for senators to come together and vote," said the chairman. "So honestly I think it's a really great example of President Trump's leadership that he's constructed not only a bill and an outline of a bill that meets his desires but also a process that maximize chances of actually getting to a deal."
Hassett added that he is also hopeful Democrats can see value in the plan and put politics aside to support it.
"The economic substance of what the president is trying to do is so powerfully positive for this country that I would have a hard time understanding why someone wouldn't support at least the process that we've undertaken. The reason is that wage growth in America has been terrible, it's one reason why I think people around the country are desperate for change."
"We've got a plan that will serve them, it will give them higher wages, and I think if we were successful at that one would hope that it wouldn't be like half of the people in Washington were really annoyed because one party had a success but rather everybody could be happy because they helped Americans have a better life, and they did it together, and I think that's a much better future world for us to live in," Hassett said.
"Make no mistake that absolutely, 100 percent, we're convinced unanimously, the Trump team and I think many people on the Hill, that this tax cut and this tax reform is a really, really big part of making America great again, to turn this country around, and it really needs to pass, and it needs to pass not so that some party can beat another party in the next election—it needs to pass because it's going to radically lift wages for workers who haven't seen that in the last decade," Hassett said.